Home Equity Gains Cooled In Q3
American homeowners saw home equity changes last quarter, with overall growth cooling.
The rate of equity growth dropped from 8% to 2.5% from Q2 to Q3 2024, according to new data from CoreLogic.
For the first time since Q4 2022, the share of negative equity rose in the U.S. on a quarterly basis. Quarter-over-quarter, the number of residential properties that fell into negative equity jumped by 30,000 (1.8%).
Many homeowners are still benefiting from rising prices, with total equity for borrowers with a mortgage reaching $17.5 trillion in total.
This is up $5,700 YOY on average per homeowner. Overall, home equity increased by $425 billion since the third quarter of 2023.
The largest average national equity gains in the third quarter were seen in Rhode Island ($43K), New Jersey ($43K), and New York ($37K).
Hawaii, Colorado, and Idaho all saw equity fall. These states experienced price gains just after the pandemic with the work-from-home boom, but are falling out of favor with buyers.
Hawaiian homeowners lost $34,000 in equity as a result of fire damage, proving that one disaster can disrupt the entire state’s housing economy.
“While home equity closely depends on home price changes, equity losses are also tied to natural disaster events since households can lose a lot of their equity following a catastrophe, particularly if not properly insured. As a result, following Maui’s 2023 devastating wildfire, Hawaii now tops the list with the largest decline in home equity,” said Dr. Selma Hepp, CoreLogic Chief Economist.
She noted that Hawaiian homeowners still rank highest for equity overall at $700,000, however.
“Nationally, average homeowner equity remains near a historical peak at over $311,000. Still, recent devastating weather events underscore the importance of maintaining that equity, particularly for households for which this is the only source of wealth,” Hepp added.
Further rate cuts by the Federal Reserve could spur a resurgence in home equity withdrawals. Cash-out refi extractions are rising and second-lien home equity products are getting a boost.
But not all homeowners are jumping to take advantage.
“Many people who desired to tap their home equity did so during the historic low rates during Covid, and these homeowners don’t have room in the equity to take another equity loan, nor would they want to refinance the loan they have now at what is still a higher rate,” Glenn Phillips, CEO and lead economic analyst at Lake Homes Realty, told The Mortgage Note.