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Friday, September 08, 2023

CoreLogic: 1.11 million Homeowners with Negative Equity in Q2 2023

by Calculated Risk on 9/08/2023 08:11:00 AM

From CoreLogic: CoreLogic: Home Equity Increases From Winter to Spring, Reducing Underwater Properties in Q2

CoreLogic® ... today released the Homeowner Equity Report (HER) for the second quarter of 2023. The report shows that U.S. homeowners with mortgages (which account for roughly 63% of all properties) saw home equity decrease by 1.7% year over year, representing a collective loss of $287.6 billion, and an average loss of $8,300 per borrower since the second quarter of 2022.

However, U.S. homeowners with mortgages gained on average $13,900 quarter over quarter, amounting to a collective increase of $806 billion – or a 5.2% gain – in home equity. And while borrowers in the West continued to experience the largest year-over-year equity losses, homeowners in states like Hawaii, California and Washington still have the most accumulated equity due to the pace of appreciation over the past decade.

“While U.S. home equity is now lower than its peak in the second quarter of 2022, owners are in a better position than they were six months ago, when prices bottomed out,” said Selma Hepp, chief economist for CoreLogic. “The 5% overall increase in home prices since February means that the average U.S. homeowner has gained almost $14,000 compared with the previous quarter, a significant improvement for borrowers who bought when prices peaked in the spring of 2022.”

“Also, while more borrowers are underwater compared with one year ago,” Hepp continued, “they are not necessarily concentrated in markets that have seen the largest price declines, as negative equity also depends on the down payment. Natural disasters and related risks also play a substantial role in home equity changes.”

Negative equity, also referred to as underwater or upside-down mortgages, applies to borrowers who owe more on their mortgages than their homes are currently worth. As of the second quarter of 2023, the quarterly and annual changes in negative equity were:

Click on graph for larger image.

Quarterly change: From the first quarter of 2023 to the second quarter of 2023, the total number of mortgaged homes in negative equity decreased by 6%, to 1.11 million homes or 2% of all mortgaged properties.

Annual change: From the second quarter of 2022 to the second quarter of 2023, the total number of homes in negative equity increased by 4% from 1.06 million homes or 1.9% of all mortgaged properties.
emphasis added
The above graph is from CoreLogic and compares Q2 2023 to Q1 2023 equity distribution by LTV. There are still 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.

The second graph is from a 2011 CoreLogic report and shows a large number of homeowners with negative equity - even as house prices were nearing a bottom!

On a year-over-year basis, the number of homeowners with negative equity has increased from 1.06 million to 1.11 million.