In the third quarter of 2024, U.S. mortgage holders saw a 2.5% increase in home equity compared to the previous year, reaching a total of $17.5 trillion nationwide. However, this growth rate was lower than the 8% seen in the second quarter, and negative equity also saw an increase for the first time in two years, as reported by CoreLogic.
The Q3 2024 Homeowner Equity Insights report by CoreLogic revealed that the number of mortgaged homes with negative equity rose by 3.5% from the second quarter. Approximately 990,000 homes, accounting for 1.8% of all U.S. properties, were considered “underwater” in Q3 2024, meaning their mortgage balance exceeded the home’s value. Despite this, negative equity actually decreased by 3% from the same period in 2023.
At the end of the third quarter, the national aggregate value of negative equity stood at $324 billion, up $4.3 billion from Q2 2024 and $9.1 billion higher than Q3 2023. In contrast, positive homeowner equity increased by $425 billion since Q3 2023.
CoreLogic attributes the rise in negative equity to fluctuating home prices. While declining home prices can benefit buyers, they may negatively impact current mortgage holders. Borrowers near the break-even equity point were more likely to transition into negative equity status as prices dropped, according to CoreLogic.
Chief economist Selma Hepp from CoreLogic also pointed out natural disasters as a contributing factor to equity losses.
“As home prices stabilized in the third quarter, the growth in home equity also slowed down, and in some regions, declined,” Hepp explained. “Equity gains are closely linked to changes in home prices, but equity losses can also result from natural disasters, where households may lose a significant portion of their equity, especially if the property is not insured.”
In Q3 2024, Hawaii, Colorado, and Idaho experienced significant declines in home equity. Hawaii saw the largest average loss per homeowner at $34,000, followed by Colorado with $17,000 and Idaho with $13,000. CoreLogic attributed Hawaii’s equity decline to a catastrophic wildfire in 2023.
“After the devastating wildfire in Maui in 2023, Hawaii now leads in the largest decline in home equity. Despite this, Hawaiian homeowners still hold a high level of homeowner equity, averaging $700,000,” the report highlighted.
Some states witnessed equity growth due to surging home prices, particularly in the Northeast. New Jersey and Rhode Island led in home-price growth during the year ending in Q3 2024, with equity increases of $43,000 and $43,000, respectively. On average, U.S. homeowners with mortgages gained $5,700 in equity compared to Q3 2023, a significant drop from the $25,400 gain seen in the second quarter.
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