Fewer Homes Are Underwater, Home Equity Increases

A recent report from CoreLogic announced that the number of homes that are underwater — that is, when the home’s value is less than the amount owed on the house — decreased while homeowner equity has risen.

According to CoreLogic, the number of homes underwater, or in negative equity, fell 15% from 1.2 million in the fourth quarter of 2022 to 1 million in the last three months of 2023. The report went on to say that a 5% price drop would mean an additional 162,000 homes would be in negative equity, but a 5% increase in home prices would mean 114,000 homes would get their equity back.

Meanwhile, home equity increased 8.6% in 2023 compared to 2022. This means that, since Q4 2022, homeowners with mortgages saw an average increase of more than $24,000. CoreLogic foresees home equity increase to over $16.6 billion by the end of this year.

The three states with the greatest equity in the fourth quarter from last year were Rhode Island, New Jersey and Massachusetts, with homeowners seeing an increase in equity by an average of over $50,000 — more than twice the national average. In addition, Rhode Island had the highest percentage year over year, with a 13.2% increase.

Selma Hepp, CoreLogic’s chief economist, saw that mortgage holders held $298,000 on average during Q4 2023 and the average loan-to value ratio is 43%, which is near record lows “which suggests that the typical homeowner has notable home equity reserves that can be tapped if needed.”