Record-breaking $3.2 Trillion Gains for Home Equity

According to analysts at CoreLogic, homeowners with mortgages, accounting for 63% of all properties in the United States,  have collectively made gains of $3.2 trillion in the third quarter of 2021. 

The company’s Homeowner Equity Report shows a 31.1% year-over-year (YOY) increase. On average, it’s a gain of around $56,700 per homeowner since Q3 2020. 

As analysts note in their report, these gains are significant for home renovation projects. Most often, property owners take a home equity loan to further increase the value of their home by making improvements to it.

This significant equity gain will be welcomed by homeowners transitioning out of mortgage forbearance, which allowed for moratoriums on mortgage payments due to the COVID-19 pandemic. Analysts concluded that mass foreclosures were avoided by the increase in equity. 

According to the chief economist at CoreLogic, Frank Nothaft, home price growth is the primary driver of home equity creation. The report notes that the price of homes has gone up 17.7% between September 2020 and September 2021. 

The data shows a steady increase since previous reports. In Q1, the growth of 19.6% YOY accounted for more than $1.9 trillion and an average gain per borrower of $33,400 compared to 2020. 

“The tremendous gains in equity we’ve seen over the last year are not surprising given home price growth has surpassed 20% in some regions in the same timeframe,” said Selma Hepp, CoreLogic’s deputy chief economist. “While considerable home price growth has not been favorable for first-time homebuyers, or buyers with budget constraints, it has created wealth stability for existing homeowners.”

If you are thinking of finding a mortgage lender, keep in mind that analysts warn of a potential drop in the price of home equities in 2022. This is especially troublesome for borrowers who are at +/-5% equity at the moment and close to the negative equity cut-off.