Home equity growth is sluggish

Homeowners only gained $12,400 in home equity in the third quarter, the smallest annual increase in 2 years

Homeowners, brace for some not-so-great news: While continuing to grow, home equity rates have increased at the slowest pace in two years, according to CoreLogic’s latest equity report, released Thursday.

In total, the average homeowner gained $12,400 in equity in the third quarter of 2018 — the smallest increase in the past eight quarters. In June, annual equity rates grew by 6.2 percent while by September they had only grown by 5.4 percent, according to the CoreLogic analysis. For American homeowners who have mortgages (63% of all homeowners), home equity grew by 9.4 percent year-over-year.

Courtesy of CoreLogic

Such trends demonstrate that the rapid home value growth seen since 2012 may be starting to ebb, according to the CoreLogic analysis. While a full-out buyer’s market is not yet on the horizon, neither home values nor equity rates are growing as fast as they once did.

“On average, homeowners saw their home equity increase again this quarter but not nearly as much as in previous quarters,” CoreLogic Chief Economist Dr. Frank Nothaft said in a prepared statement. “This lower year-over-year gain reflects the slowing in appreciation we’ve seen in the CoreLogic Home Price Index.”

The number of homes with negative equity has also dropped more slowly than in previous quarters — since peaking at 25.9 percent at the height of the 2008 financial crisis, the number of homeowners owing the bank more than their house is worth has steadily gone down. Still, this quarter marked one of the worst periods since recovery began in 2010. The number of properties in negative equity fell by only 4 percent to 2.2 million homes since the previous quarter. Year-over-year, the number of homes in negative equity fell 16 percent from 2.6 million homes, according to the CoreLogic analysis.

Courtesy of CoreLogic

“The number of homes in a negative equity position have remained around 2.2 million for two consecutive quarters this year,” CoreLogic President and CEO Frank Martell said. “Without equity, those homeowners are unable to sell their homes and are more likely to transition from delinquency to foreclosure if they face financial distress.”

Email Veronika Bondarenko