Home prices have been on a tear this year, hitting record highs and pushing up homeowners’ wealth.
Home equity — the difference between the value of your home and how much you owe on your mortgage — rose by nearly 20% in the first part of this year from last year, according to CoreLogic. Homeowners with mortgages — about 62% of properties — saw an equity gain of nearly $2 trillion nationally from last year, which is an average gain of $33,400 per borrower.
“Homeowner equity has more than doubled over the past decade and become a crucial buffer for many weathering the challenges of the pandemic,” said Frank Martell, president and CEO of CoreLogic.
“These gains have become an important financial tool and boosted consumer confidence in the US housing market, especially for older homeowners and Baby Boomers who’ve experienced years of price appreciation,” he said.
Soaring demand for a record-low supply of homes has caused a blitz in home prices over the past year, pushing home equity higher.
Across the US, home prices increased 11.4% this year through March, according to the national CoreLogic Home Price Index. That’s led to an increase in the average amount of equity held by homeowners with a mortgage, said Frank Nothaft, chief economist for CoreLogic, which is now $216,000 over the life of their loan.
“This reduces the likelihood of large numbers of distressed sales from homeowners who emerge from forbearance later in the year,” he said.
The increase in equity is particularly important for the 2.12 million homeowners who fell behind on their mortgage and are still in forbearance programs with their lender, which allowed them to delay or defer payments, according to Black Knight. While more people are leaving the programs, 4% of homeowners remain in a Coronavirus-related forbearance plan, according to the mortgage data company.
But the strong housing market means that even homeowners who cannot catch up on their mortgage after forbearance will more readily be able to sell their home rather than losing it to foreclosure.
The number of homes that are “underwater” — those with outstanding mortgages that exceed the home’s value — decreased by 24% from the beginning of 2020, according to the report.