Photo: James Bombales
While buyers grappled with skyrocketing California home prices, owners experienced near-unprecedented equity gains, netting an average of $34,000 this year.
That’s according to the Q3 CoreLogic Homeowner Equity Insights report, which examines the share of mortgages in negative equity as well as those in a positive position. A borrower with negative equity owes more money on their mortgage loan than the home’s current market value, which is sometimes referred to as an ‘underwater mortgage.’ Widespread negative equity can burst a real estate bubble, inflicting severe economic damage.
Fortunately for Californians, negative equity in the state accounts for just 1.7 percent of mortgaged properties, which is considered low. In Los Angeles and San Francisco, the negative equity share stands at 1.1 percent and 0.7 percent, respectively — ranking among the least challenged markets in the country.
Washington was the only state to record a higher year-over-year equity gain, with an average of $36,000 per borrower. California was followed by Massachusetts ($31,000), Rhode Island and Idaho ($29,000), and Arizona ($28,000). States that saw the slightest equity boosts included North Dakota ($5,000), Illinois ($6,000), and Iowa and Nevada ($7,000).
Nationwide, US homeowners logged a 10.8 percent annual equity increase, about $17,000 per household or $1 trillion collectively. The third quarter of 2020 logged the largest average equity gain in more than six years.
Strong buyer demand, historically low interest rates and dwindling inventory have kept the housing market afloat during these challenging times. Many homeowners who are struggling financially have been able to apply for forbearance or sell their home at a profit. Thousands more have opted to refinance their mortgages, securing lower monthly payments, or tapped into their home equity to cover renovation costs.
“The average family with a home mortgage loan had $194,000 in home equity in the third quarter,” said Dr. Frank Nothaft, chief economist for CoreLogic. “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.”
