Due to home prices falling in most markets, the average U.S. homeowner lost approximately $13,400 in equity during the past year, according to Cotality.
Total equity for homeowners with a mortgage totaled $17.1 trillion in the third quarter, according to the firm’s latest Homeowner Equity Report. That’s down 2.1%, or $373.8 billion, compared with the second quarter.
The report also shows that the number of mortgaged homes in negative equity increased year-over-year by 21% to 1.2 million homes. That’s 2.2% of all homeowners with a mortgage.
Compared to the second quarter, there has been a 6.7% increase in the number of mortgaged residential properties sitting in negative equity.
“As the pace of home price growth slows and markets recalibrate from pandemic peaks, we’re seeing a clear shift in equity trends,” says Selma Hepp, chief economist for Cotality, in the report. “Negative equity is on the rise, driven in part by affordability challenges that have led many first-time and lower-income buyers to over-leverage through piggyback loans or minimal down payments. While overall home equity remains elevated, recent purchasers with smaller down payments may now face negative equity.”
After gaining $25,000 in 2023 and another $4,900 in 2024, recent equity gains have stalled, the firm says.
While many homeowners are still flush with stored home equity, recent quarterly declines reflect home price corrections in some markets coupled with higher levels of equity extractions and buyers who bought homes with lower down payments.
As a result, loan-to-value (LTVs) ratios have shifted higher. There has been a particular increase in the share of homeowners with 85% to 94% LTVs, Cotality says.
Photo: Kelly Sikkema