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Monday, September 21, 2020

CoreLogic: 1.7 Million Homes with Negative Equity in Q2 2020

by Calculated Risk on 9/21/2020 08:36:00 AM

From CoreLogic: Home Equity Rises Despite the Pandemic: CoreLogic Reports Homeowners Gained Over $620 Billion in Equity in Q2 2020

CoreLogic® ... today released the Home Equity Report for the second quarter of 2020. The report shows U.S. homeowners with mortgages (which account for roughly 63% of all properties) have seen their equity increase by 6.6% year over year. This represents a collective equity gain of $620 billion, and an average gain of $9,800 per homeowner, since the second quarter of 2019.

Despite a cool off in April, home-purchase activity remained strong in the second quarter of 2020 as prospective buyers took advantage of record-low mortgage rates. This, coupled with constricted for-sale inventory, helped drive home prices up and add to borrower equity through June. However, with unemployment expected to remain elevated throughout the remainder of the year, CoreLogic predicts home price growth will slow over the next 12 months and mortgage delinquencies will continue to rise. These factors combined could lead to an increase of distressed-sale inventory, which could put downward pressure on home prices and negatively impact home equity.
Negative equity, also referred to as underwater or upside down, applies to borrowers who owe more on their mortgages than their homes are worth. As of the second quarter of 2020, negative equity share, and the quarter-over-quarter and year-over-year changes, were as follows:

• Quarterly change: From the first quarter of 2020 to the second quarter of 2020, the total number of mortgaged homes in negative equity decreased by 5.4% to 1.7 million homes or 3.2% of all mortgaged properties.

• Annual change: In the second quarter of 2019, 2.1 million homes, or 3.8% of all mortgaged properties, were in negative equity. This number decreased by 15% in the second quarter of 2020 to 1.7 million mortgaged properties in negative equity.

• National aggregate value: The national aggregate value of negative equity was approximately $284 billion at the end of the second quarter of 2020. This is down quarter over quarter by approximately $0.7 billion, or 0.2%, from $285 billion in the first quarter of 2020, and down year over year by approximately $20 billion, or 6.6%, from $304 billion in the second quarter of 2019.
emphasis added
Click on graph for larger image.

This graph from CoreLogic compares Q2 to Q1 2020 equity distribution by LTV. There are still quite a few properties with LTV over 125%.  But most homeowners have a significant amount of equity.  This is a very different picture than at the start of the housing bust when many homeowners had little equity.

On a year-over-year basis, the number of homeowners with negative equity has declined from 2.1 million to 1.7 million.