Home Equity Making Gains In Q2 Of 2022

According to the CoreLogic Q2 2022 Home Equity Report (HER), homeowners still have net worth despite the slowdown in home price growth in the second quarter.

The net worth of U.S. homeowners with mortgages, which make up about 63 percent of all housing, rose 27.8 percent in a year. 

This amounts to a total of $3.6 trillion as of the second quarter of 2021, with an average of $60,200 per borrower.

The average total capital per borrower reached $300,000, the highest in the data series. Fifteen states, including Hawaii, California, and Florida, saw growth above the national average.

Rising home prices and rising mortgage payments over the past two years have helped push the national average cost of credit to 42 percent, the lowest since the 2010 data series. 

“For many families, wealth is the only source of wealth,” said Selma Hepp, Vice President of Finance at CoreLogic. 

“Recently record rebates and fees on loans provide financial security for many homeowners when the economy is bad. Additionally, record high prices continue to fuel housing demand, especially as families move to more affordable areas.

Bad foreclosures, also known as underwater bullets or foreclosures, affect lenders who now owe more on their mortgage than their home is worth. 

From the first quarter to the second quarter of 2022, the number of homes with negative assets fell 7% to 1 million households, representing 1.8% of all foreclosures. 

Compared to the second quarter of 2021, the total number of non-performing mortgages fell by 18%.

Changes in housing prices affect equity. Lenders with equity positions close to a negative equity ratio (+/- 5%) can convert to negative equity if prices change. 

CoreLogic predicts that 116,000 households will return to equity if house prices rise by 5%. But if house prices fall by 5%, 148,000 homes will be submerged.