Home equity gains grow in Q4

Home equity continued to grow during the fourth quarter of 2022, but at a much slower pace compared to gains seen earlier in the year, a report by CoreLogic found. 

By the end of December, 63% of homeowners saw equity increase by 7.3% for a collective gain of $1 trillion, according to the data vendor's analysis published Thursday. In the previous quarter, home equity rose by 15.8%. 

The average borrower gained $14,300 in home equity year-over-year, significantly lower than the $63,100 gain seen in the first quarter of 2022. This was in part due to a slowdown in home price growth, the report noted.

"While equity gains contracted in late 2022 due to home price declines in some regions, U.S. homeowners on average still have about $270,000 in equity more than they had at the onset of the pandemic," said Selma Hepp, chief economist at CoreLogic, in a written statement. "Even in Idaho, where borrowers were the most vulnerable to losses, the typical homeowner with a mortgage still has about $250,000 in remaining home equity."

Some homeowners on the West Coast saw equity declines in the fourth quarter, with Idaho, Washington, California and Utah reporting annual home equity drops of -$21,400, -$18,900, -$8,500 and -$4,600, respectively.

"The new hot spots for equity declines are largely markets that have seen the most significant home price deceleration, including Boise, Idaho; the San Francisco Bay Area; cities in Utah; Phoenix and Austin, Texas," Hepp added.

On the other hand, Florida homeowners gained $49,000 in home equity in the fourth quarter, continuing the trend of having the largest home price gains in the country for the past year.

A Redfin report also found that metro areas in the sunny state of Florida, such as Miami, North Port-Sarasota and Lakeland saw some of the largest annual home value gains in the fourth quarter. The reason for the growth stemmed from affordable house prices.

The data vendor's report estimates that 66,000 borrowers entered into negative equity – also referred to as underwater or upside-down mortgages – in the fourth quarter.

Per the report, the total number of underwater mortgages increased from the previous quarter by 6% to 1.2 million homes, but year-over-year properties in negative equity declined by 2% to 1.2 million homes, or 2.2% of all mortgaged properties.

The "total number of underwater properties is now approaching levels seen at the end of 2021, which was the lowest since the Great Recession" and "if home prices increase by 5%, 145,000 [of the properties] would regain equity," the report said.