The California housing market has experienced a decline, resulting in a loss of $59,600 in equity for homeowners with mortgages in the past year. This decrease in home prices can be seen as good news for those looking to buy a house, as there have been significant discounts in the market.
These equity losses were identified through CoreLogic’s calculations of homeowner “equity” in 46 states and the District of Columbia. When comparing what is owed on a home to its estimated value, a gap is determined, which represents the homeowner’s equity.
The current housing market is facing challenges due to low housing affordability and rising mortgage rates. These factors have restricted the pool of qualified buyers, ultimately leading to a decrease in home values.
Not only California but also 13 other states and D.C. experienced a decline in home equity. The overall average dip in the United States was $5,400, marking the first decrease since 2012.
Significant Decline in the West
The western region, which was one of the hottest areas in the housing market during the pandemic, saw a substantial decline in equity over the past year. Only Washington state had a larger equity drop than California, with a loss of $74,300. Utah, Nevada, and Idaho also experienced significant drops in equity.
On a percentage basis, California had a 9.7% decline, second only to Washington’s 15%. Nevada, Idaho, and Utah also saw double-digit percentage declines.
The average equity decline for the entire United States was 0.7%. It is worth noting that Texas saw a flat equity rate, and Florida experienced a gain in equity, ranking second nationally.
Remaining Equity
While falling equity may raise concerns for mortgaged homeowners, the typical homeowner still has a significant amount of financial cushion in their home values. In California, the gap between a home’s value and its mortgage is $558,000, exceeded only by Hawaii’s $675,800.
Nationally, homeowners still have $274,000 in equity. Texas has $214,200, and Florida has $286,700 in equity.
It is important to note that these equity estimations do not take into account transaction costs required to convert home profits into cash.
Underwater Mortgaged Owners
Another factor to consider is the percentage of mortgaged owners who are “underwater,” meaning their home loans exceed the value of their property. California has the lowest percentage of underwater owners at just 0.9%, compared to the national average of 2%.
States such as Alaska, Arizona, Florida, Illinois, Indiana, and Nevada also have a low percentage of underwater owners. On the other hand, states like Louisiana, Iowa, Oklahoma, Arkansas, and Kentucky have higher percentages of underwater owners.
Conclusion
Despite the decline in home values during the first quarter, it is unlikely that there will be a wave of panic selling resulting in deep discounts in the California housing market. Selma Hepp, CoreLogic’s chief economist, highlights the relatively modest scale of the recent drops in California values. Homeowners in San Francisco, for example, still have an average of $1 million in home value above their outstanding mortgage even after experiencing an equity loss of $174,000.
Overall, while there has been a decrease in equity, recent price gains suggest that homeowners are starting to regain some of the lost equity.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at [email protected]
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
