With home prices surging in many areas of the country, U.S. homeowners gained an average $17,000 in the equity in their properties this year.
Nationwide homeowners equity was up $1 trillion in the third quarter compared with 2019 levels, according to a new report by CoreLogic. The average homeowner has seen an almost 11% rise in their property’s equity – what their home is worth vs. what they owe on it.
“Over the past year, strong home price growth has created a record level of home equity for homeowners,” said Dr. Frank Nothaft, chief economist for CoreLogic. “The average family with a home mortgage loan had $194,000 in home equity in the third quarter.
“This provides an important buffer to protect families if they experience financial difficulties.”
Nationwide, about 3% of homeowners owe more than their property is currently worth.
High home equity rates help protect property owners from losing their homes to foreclosure. Even if they are delinquent on mortgage payments, they can often sell the home for more than what the lenders are owned.
Home mortgage delinquency rates have jumped during the COVID-19 pandemic as unemployment levels have climbed across the country.
“We’ve seen a spike in delinquency rates related to the pandemic recession,” Nothaft said. “The serious delinquency rate of 90 days or more late was at a generational low pre-pandemic of 1.2% nationwide.
“It’s jumped three and a half times from that level as of September and was at 4.2%.”
Foreclosures have remained low with moratoriums for many properties and millions of Americans seeking loan payment forbearance.
“Of those families that are in serious delinquency about 70% of them are in forbearance programs,” Nothaft said. “That will help to mitigate how many of these seriously delinquent loans go into distress sales, but it will not prevent all of them.”
Nothaft expects a rise in home foreclosures and distressed sales during the second half of 2021.
“But it will be a relatively small increase relative to the foreclosure crisis we saw during the Great Recession.”