- The share of properties in negative equity fell to 4.3 percent in the second quarter 2018
- Approximately 221,000 residential properties regained equity compared with the first quarter of 2018
- About 2.2 million mortgaged residential properties are still in negative equity
IRVINE, Calif. — (BUSINESS WIRE) — September 20, 2018 — CoreLogic® (NYSE: CLGX), a leading global property information, analytics and data-enabled solutions provider, today released the Home Equity Report for the second quarter of 2018. The report shows that U.S. homeowners with mortgages (which account for roughly 63 percent of all properties) have seen their equity increase by 12.3 percent year over year, representing a gain of nearly $981 billion since the second quarter of 2017.
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CoreLogic Chief Economist Dr. Frank Nothaft (Photo: Business Wire)
Additionally, the average homeowner gained $16,200 in home equity between the second quarter of 2017 and the second quarter of 2018. While home equity grew in almost every state in the nation, western states experienced the most significant increases. California homeowners gained an average of approximately $48,800 in home equity, and Washington homeowners experienced an average increase of approximately $41,100 in home equity (Figure 1).
From the first quarter of 2018 to the second quarter of 2018, the total number of mortgaged homes in negative equity decreased 9 percent to 2.2 million homes or 4.3 percent of all mortgaged properties. Year over year, the number of mortgaged properties in negative equity fell 20.1 percent from 2.8 million homes – or 5.4 percent of all mortgaged properties – in the second quarter of 2018.
“Homeowner properties continued to increase in value this quarter with homeowners gaining an average of $16,200 in home equity wealth,” said Dr. Frank Nothaft, chief economist for CoreLogic. “When aggregated across all homeowners that totals almost $1 trillion in gains in home equity wealth. This wealth gain will support additional consumption spending and home improvement expenditures in coming years.”
Negative equity, often referred to as being underwater or upside down, applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in a home’s value, an increase in mortgage debt or both. Negative equity peaked at 26 percent of mortgaged residential properties in the fourth quarter of 2009, based on the CoreLogic equity data analysis which began in the third quarter of 2009.
The national aggregate value of negative equity was approximately $279.8 billion at the end of the second quarter of 2018. This is down quarter over quarter by approximately $5.5 million, from $285.3 billion in the first quarter of 2018.
“Negative equity levels continue to drop across the US with the biggest declines in areas with strong price appreciation,” said Frank Martell, president and CEO of CoreLogic. “Further, the relatively low level of shadow inventory contributes to the chronic shortage of housing supply and price increases in many markets.”
For ongoing housing trends and data, visit the CoreLogic Insights Blog: https://www.corelogic.com/insights-index.aspx.
The amount of equity for each property is determined by comparing the
estimated current value of the property against the mortgage debt
outstanding (MDO). If the MDO is greater than the estimated value, then
the property is determined to be in a negative equity position. If the
estimated value is greater than the MDO, then the property is determined
to be in a positive equity position. The data is first generated at the
property level and aggregated to higher levels of geography. CoreLogic
data includes more than 50 million properties with a mortgage, which
accounts for more than 95 percent of all mortgages in the U.S. CoreLogic
uses public record data as the source of the MDO, which includes both
first-mortgage liens and second liens, and is adjusted for amortization
and home equity utilization in order to capture the true level of MDO
for each property. The calculations are not based on sampling, but
rather on the full data set to avoid potential adverse selection due to
sampling. The current value of the property is estimated using a suite
of proprietary CoreLogic valuation techniques, including valuation
models and the CoreLogic Home Price Index (HPI). In August 2016, the
CoreLogic HPI was enhanced to include nearly one million additional
repeat sales records from proprietary data sources that provide greater
coverage in home price changes nationwide. The increased coverage is
particularly useful in 14 non-disclosure states. Additionally, a new
modeling methodology has been added to the HPI to weight outlier pairs,
ensuring increased consistency and reducing month-over-month revisions.
The use of the enhanced CoreLogic HPI was implemented with the Q2 2016
Equity report. Only data for mortgaged residential properties that have
a current estimated value are included. There are several states or
jurisdictions where the public record, current value or mortgage data
coverage is thin and have been excluded from the analysis. These
instances account for fewer than 5 percent of the total U.S. population.
The percentage of homeowners with a mortgage is from the 2016 American
Community Survey. Fourth quarter of 2017 data was revised. Revisions
with public records data are standard, and to ensure accuracy, CoreLogic
incorporates the newly released public data to provide updated results.