The average U.S. mortgage borrower saw their home equity increase by about $24,000 year over year in the fourth quarter – a historic high – according to CoreLogic.
As a result, the number of U.S. homeowners who were underwater on their mortgages dropped 15% in the fourth quarter compared with the fourth quarter of 2022.
Homeowners with mortgages in Rhode Island, New Jersey and Massachusetts all saw annual equity gains of more than $50,000 in the fourth quarter, according to the firm’s Homeowner Equity Report.
Nationwide, homeowners with mortgages – which account for roughly 62% of all properties – saw their home equity increase by 8.6% year over year, representing a collective gain of $1.3 trillion.
This brought total net homeowner equity to more than $16.6 trillion at the end of 2023.
Texas was the only state where borrowers experienced a year-over-year home equity loss, down $6,000 since the fourth quarter of 2022.
Among major metro areas, Miami continued to lead the nation for annual equity gains, with borrowers netting $63,200 over the past year.
The home equity gains in the fourth quarter provided homeowners with a solid financial cushion, CoreLogic says.
This is particularly true for baby boomers, who have been in their homes for a while and thus accumulated substantial equity.
“Rising home prices continue to fuel growing home equity, which, at $298,000 per average borrower remained near historic highs at the end of 2023,” says Selma Hepp, chief economist for CoreLogic, in the report. “By extension, at 43 percent, the average loan-to-value ratio of U.S. borrowers has also remained in line with record lows, which suggests that the typical homeowner has notable home equity reserves that can be tapped if needed.
“More importantly,” Hepp says, “home price growth over the last year has helped lift the equity of homeowners who were underwater because of 2022 price declines – meaning that their mortgage amount was higher than the value of their properties. Now, slightly more than 1 million borrowers are underwater, the lowest number recorded in CoreLogic historic data and significantly below the 12 million seen coming out of the Great Recession.”
Photo: Pepi Stojanovski