- U.S. Homeowners Gained an Average of Almost $13,000 in Equity
- 500,000 Homes Would Regain Equity If Home Prices Rose Another 5 Percent
- The Number of Underwater Homes Decreased by 22 Percent Year Over Year
IRVINE, Calif. — (BUSINESS WIRE) — September 21, 2017 — CoreLogic® (NYSE: CLGX), a leading global property information, analytics and data-enabled solutions provider, today released its Q2 2017 home equity analysis, which shows U.S. homeowners with mortgages (roughly 63 percent of all homeowners*) have seen their equity increase by a total of 10.6 percent year over year, representing a gain of $766 billion since Q2 2016.
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Quote from Chief Economist Dr. Frank Nothaft. (Graphic: Business Wire)
Additionally, homeowners gained an average of $12,987 in equity between Q2 2016 and Q2 2017. Western states led the equity increase with Washington homeowners gaining an average of approximately $40,000 in home equity and California homeowners gaining an average of approximately $30,000 in home equity (Figure 1). Home price increases in these states drove the equity gains.
From Q1 2017** to Q2 2017, the total number of mortgaged residential properties with negative equity decreased 10 percent to 2.8 million homes, or 5.4 percent of all mortgaged properties. Year over year, negative equity decreased 21.9 percent from 3.6 million homes, or 7.1 percent of all mortgaged properties, from Q2 2016 to Q2 2017.
“Over the last 12 months, approximately 750,000 borrowers achieved positive equity,” said Dr. Frank Nothaft, chief economist for CoreLogic. “This means that mortgage risk continues to decline and, given the continued strength in home prices, CoreLogic expects home equity to rise steadily over the next year.”
Negative equity, often referred to as being “underwater” or “upside down,” applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in home value, an increase in mortgage debt or both.
Negative equity peaked at 26 percent of mortgaged residential properties in Q4 2009 based on CoreLogic equity data analysis, which began in Q3 2009.
The national aggregate value of negative equity was approximately $284.4 billion at the end of Q2 2017. This is up quarter over quarter by approximately $200 million, or 0.1 percent, from $284.2 billion in Q1 2017 and down year over year by approximately $700 million, or 0.2 percent, from $285.1 billion in Q2 2016.
“Homeowner equity reached $8 trillion in the second quarter of 2017, which is more than double the level just five years ago,” said Frank Martell, president and CEO of CoreLogic. “The rapid rise in homeowner equity not only reduces mortgage risk, but also supports consumer spending and economic growth.”
*Homeownership mortgage source: 2016 American Community Survey.
**Q1
2017 data was revised. Revisions with public records data are standard,
and to ensure accuracy, CoreLogic incorporates the newly released public
data to provide updated results.
For ongoing housing trends and data, visit the CoreLogic Insights Blog: http://www.corelogic.com/blog.
Methodology
The amount of equity for each property is determined by comparing the
estimated current value of the property against the mortgage debt
outstanding (MDO). If the MDO is greater than the estimated value, then
the property is determined to be in a negative equity position. If the
estimated value is greater than the MDO, then the property is determined
to be in a positive equity position. The data is first generated at the
property level and aggregated to higher levels of geography. CoreLogic
data includes more than 50 million properties with a mortgage, which
accounts for more than 95 percent of all mortgages in the U.S. CoreLogic
uses public record data as the source of the MDO, which includes both
first-mortgage liens and second liens, and is adjusted for amortization
and home equity utilization in order to capture the true level of MDO
for each property. The calculations are not based on sampling, but
rather on the full data set to avoid potential adverse selection due to
sampling. The current value of the property is estimated using a suite
of proprietary CoreLogic valuation techniques, including valuation
models and the CoreLogic Home Price Index (HPI). In August 2016, the
CoreLogic HPI was enhanced to include nearly one million additional
repeat sales records from proprietary data sources that provide greater
coverage in home price changes nationwide. The increased coverage is
particularly useful in 14 non-disclosure states. Additionally, a new
modeling methodology has been added to the HPI to weight outlier pairs,
ensuring increased consistency and reducing month-over-month revisions.
The use of the enhanced CoreLogic HPI was implemented with the Q2 2016
Equity report. Only data for mortgaged residential properties that have
a current estimated value are included. There are several states or
jurisdictions where the public record, current value or mortgage data
coverage is thin and have been excluded from the analysis. These
instances account for fewer than 5 percent of the total U.S. population.
