Even amid a pandemic and ensuing economic downturn, home values continue to soar, as evidenced by the fact that the average homeowner gained $17,000 in equity this year.
According to the latest data from property analytics provider CoreLogic, homeowners saw their equity grow by 10.8 percent year over year in the third quarter. That adds up to over $1 trillion collectively, or an average of $17,000 per homeowner in the United States.
Such high growth has not been seen since 2014 and is fueled by country-wide inventory shortages. Coupled with record-low interest rates, the low number of new homes being built and existing homes being placed on the market is causing steep competitions for the ones that are up for sale among buyers hoping to tap into such unrivaled price growth.
CoreLogic
“Over the past year, strong home price growth has created a record level of home equity for homeowners,” Dr. Frank Nothaft, chief economist for CoreLogic, said in a press statement. “The average family with a home mortgage loan had $194,000 in home equity in the third quarter. This provides an important buffer to protect families if they experience financial difficulties, and is one reason for the generational-low in foreclosure rates reported in September.”
The number of homes in negative equity, or homes in which the mortgage is more than the house is worth, fell by 18.3 percent in the third quarter. Only 1.6 million properties, or 3.7 percent of all homes with a mortgage, are currently in negative equity — a historic low and 6.9 percent drop from the second quarter alone.
CoreLogic predicts that home price growth may start to cool in the second part of 2021, as the economic effects of the coronavirus outbreak first start to show on factors like delinquencies and buyers’ abilities to make big purchases. But for those who own a home now, such growth can provide some protection in the event of pandemic-related unemployment or economic downturn.
CoreLogic
While quickly growing home prices can fuel inequality, states with highest prices also saw the highest growth. Washington, California and Massachusetts saw the biggest equity gains at $35,800, $33,800 and $31,200, respectively. North Dakota saw the lowest equity gain of $5,400 per homeowner.
“The housing market has remained a strong pillar in an otherwise tumultuous economic year,” Frank Martell, president and CEO of CoreLogic, said in a press statement. “A sharp rise in demand, spurred by record-low interest rates, continues to bolster homeowner equity. And with many people now spending more time than ever before at home, some homeowners have tapped into their strengthening equity to fund renovations.”