Homeowners Have More Equity; Homebuyers Have Less Market Optimism
Written By: Joel Palmer, Op-Ed Writer
While escalating home values have made buying more challenging for many consumers, they have had one major benefit: home equity. And, according to the latest CoreLogic Homeowner Equity Insights report, the average U.S. mortgagee increased their home equity by $25,000 in the last year.
CoreLogic analysis shows U.S. homeowners with mortgages (roughly 62 percent of all properties) have seen their equity increase by a total of $1.3 trillion since the second quarter of 2023. That represents a gain of 8 percent year over year, bringing the total net homeowner equity to over $17.6 trillion in the second quarter of 2024. CoreLogic says existing homeowners average about $315,000 in equity and almost $129,000 more than at the onset of the COVID pandemic.
“The substantial accumulation of home equity for existing homeowners has served as an important financial buffer in times of uncertainty, as some homeowners are facing higher costs of homeowners’ insurance and taxes and have had to tap into their equity to prevent falling behind on their mortgages. As a result, mortgage delinquency rates have remained at historical lows despite the inflationary pressures and higher costs of almost all non-mortgage, homeownership-related expenses,” said Dr. Selma Hepp, Chief Economist for CoreLogic.
It’s the uncertainty and inflationary pressures that have kept more homeowners from using their home equity.
Intercontinental Exchange (ICE) Inc. reported in last month’s ICE Mortgage Monitor Report that tappable home equity, defined as money that borrowers can access while still maintaining at least 20 percent equity in their homes, reached a new high of $11.5 trillion in June. ICE reported that 32 million mortgage holders have at least $100,000 in tappable equity, with 4.6 million holding at least $500,000.
Despite these numbers, ICE reported that home equity lending has been sluggish because of higher interest rates, which made home equity more expensive to access.
Fannie Mae researchers published recently publish the results of a survey of homeowners and renters conducted at the end of 2023 that found that 67 percent of homeowners had experienced increasing costs for utilities, 57 percent reported increasing homeowners insurance and 56 percent saw their real estate taxes rise.
Not all homeowners even have equity to tap. As of the second quarter, less than 1 million, or 1.7 percent of all mortgaged properties, have negative equity. CoreLogic reported that a 5 percent price in overall home prices would bring about 105,000 of those negative equity homes on the positive side. A 5 percent decline in prices would cause an additional 139,000 mortgage payers to fall underwater. CoreLogic projects that home prices will increase by 2.3 percent from June 2024 to June 2025.
Maine ($58K), California ($55K), and New Jersey ($53K) experienced the largest average national equity gains. Three states posted annual equity losses: Texas (-$3K), Oklahoma (-$8K), and North Dakota (-$8K).
The increase in values and in mortgage rates have kept consumers from feeling good about the possible purchase of a home.
The latest Fannie Mae Home Purchase Sentiment Index® (HPSI) reported significantly greater optimism about the future direction of mortgage rates despite showing little change in overall homebuying sentiment.
In August, a survey-high 39 percent of consumers said they expect mortgage rates to decline in the next 12 months, up from 29 percent the month prior. A greater share of consumers also indicated that they expect home prices to decrease over the next 12 months, although the plurality continues to expect prices to increase.
Despite the improved affordability outlook, consumers’ perception of homebuying conditions remained unchanged, with only 17 percent indicating it’s a good time to buy a home. About 65 percent believe it’s a good time to sell a home.
“Most consumers remain apprehensive about the housing market and continue to point to the lack of affordability and supply as the chief reasons for their pessimism,” said Mark Palim, Fannie Mae Vice President and Deputy Chief Economist.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning
