Homeowners Earn $ 2.9 Trillion in Equity in Q2 2021
Mortgage owners earned $ 2.9 trillion in equity in the second quarter of 2021, a 29.3% year-over-year increase, according to a new report through CoreLogic published Wednesday. This represents an average gain of $ 51,500 (!) Per borrower since the second quarter of 2020.
The amount of equity in a property is determined by comparing the estimated present value of the property to the outstanding mortgage debt (MDO). If the MDO is less than the estimated value, the property is considered to be in a net positive position and if the MDO is greater then the property is considered to be in a net negative position. CoreLogic based the report on public archival data for mortgaged residential properties that have a current estimated value.
States with the largest average year-over-year gain per borrower include the very hot western markets of California, Washington, Hawaii, Idaho, Utah and Arizona, the largest gains being recorded in California ($ 116,000 per borrower). Meanwhile, the Chicago-Naperville-Arlington Heights metropolitan area had the highest share of negative equity for homeowners in the second quarter of 2021, at 5.2%.
“Real estate wealth is at an all time high and will boost economic activity over the coming year,” Dr Frank Nothaft, chief economist of CoreLogic, said in a statement. “Higher wealth drives additional consumer spending and also supports room additions and other home investments, adding to overall economic activity.”
Compared to the first quarter of 2021, the total number of homes mortgaged with negative equity in the second quarter decreased 12% to 1.2 million homes. In total, owners of 163,000 residential properties regained their equity in the second quarter of 2021. Year over year, 30% fewer homes have negative equity in the second quarter of 2021 compared to the second. quarter 2020.
In addition, the national aggregate value of negative equity declined $ 18.9 billion or 6.6% in the second quarter of 2021 compared to the second quarter of 2020.
This sharp increase in equity is partly explained by the increase in consumer confidence, which has reached its peak highest level since the start of the pandemic in June 2021, according to the report. Among mortgage holders surveyed by CoreLogic, 59% of respondents said they felt extremely confident in their ability to stay up to date on their mortgage payments for years to come. In addition, the majority of borrowers who fell behind on their mortgage payments during the pandemic have a large home equity cushion, which has helped them to avoid foreclosure.
“Growing homeowners’ equity provides a solid financial cushion for tens of millions of Americans. For those most affected by the pandemic, equity gains will help play a critical role in avoiding foreclosure, ”said Frank Martell, president and CEO of CoreLogic, in a statement. “Based on the expected increases in economic activity and home values over the next year, we expect to see further equity gains and a corresponding decline in negative equity, forbearance rates. and locking. “
Looking ahead, based on data from the second quarter of 2021, if home prices rose 5%, 160,000 homeowners would regain their equity, but if home prices fell 5%, 211,000 would fall below l ‘water.