In a surprising turn of events, the average US homeowner with a mortgage has experienced a decline in home equity for the first time in over a decade. According to real estate data tracker CoreLogic, the average homeowner equity per borrower in the first quarter was $274,070, a 1.9% decrease compared to the previous year.
This decline in homeowner equity is reminiscent of the early 2010s when the housing market was recovering from the mortgage crisis and foreclosure epidemic that triggered the Great Recession.
Overall, homeowners with a mortgage in the US lost a combined $108.4 billion in home equity between the first quarter of 2022 and the first quarter of 2023. This translates to a 0.7% decrease. Homeowner equity is calculated by subtracting the remaining mortgage balance from the property’s current value and tends to fluctuate along with home prices.
During the housing market boom that followed the mortgage crisis, average homeowner equity reached a record-high of $297,510 in the second quarter of last year. However, the market has since cooled off due to higher mortgage rates and a scarcity of available homes. The National Association of Realtors reported a 23.2% decline in sales of previously occupied US homes in the 12 months leading up to April, marking nine consecutive months of annual sales declines of 20% or more. As a result, home prices have also been affected, with the national median home price falling by 1.7% to $388,800 in April compared to the previous year.
Despite the decline in home equity, the number of homeowners who owe more on their mortgage than their home is worth, also known as being “underwater,” remained stable at 1.2 million homes or 2.1% of mortgaged properties in the first quarter. However, this figure represents a 4% increase from the previous year. At the state level, Washington, California, and Utah experienced the largest average decline in home equity at $74,300, $59,600, and $37,700, respectively.
Overall, the US housing market is facing challenges, with homeowners experiencing a decline in home equity for the first time in years. It remains to be seen how the market will fare in the coming months, but experts are closely monitoring the situation.
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