CoreLogic® (NYSE: CLGX), a leading global property information, analytics and data-enabled solutions provider, today released the Home Equity Report for the fourth quarter of 2019. The report shows U.S. homeowners with mortgages (which account for roughly 63% of all properties) have seen their equity increase by 5.4% year over year, representing a gain of nearly $489 billion since the fourth quarter of 2018.
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Negative Equity Share for Select Metropolitan Areas; CoreLogic Q4 2019 (Graphic: Business Wire)
The average homeowner gained $7,300 in home equity between the fourth quarter of 2018 and the fourth quarter of 2019. States with the largest gains include Idaho, where homeowners gained an average of $18,700; Wyoming, where homeowners gained an average of $17,900; and Arizona, where homeowners gained an average of $14,800.
From the third quarter of 2019 to the fourth quarter of 2019, the total number of mortgaged homes in negative equity decreased by 4.8% to 1.9 million homes or 3.5% of all mortgaged properties. The number of mortgaged properties in negative equity during the fourth quarter of 2019 fell by 15%, or 330,000 homes, compared to the fourth quarter of 2018, when 2.2 million homes, or 4.2% of all mortgaged properties, were in negative equity.
“The CoreLogic Home Price Index recorded a quickening of home price gains during the fourth quarter of 2019, helping to boost home equity wealth,” said Dr. Frank Nothaft, chief economist for CoreLogic. “The average family with a mortgage had a $7,300 gain in home equity during the past year, and a total of $177,000 in home equity wealth.”
Negative equity, often referred to as being underwater or upside down, applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in a home’s value, an increase in mortgage debt or both. Negative equity peaked at 26% of mortgaged residential properties in the fourth quarter of 2009, based on the CoreLogic equity data analysis, which began in the third quarter of 2009.
The national aggregate value of negative equity was approximately $283 billion at the end of the fourth quarter of 2019. This is down quarter over quarter by approximately $19.9 billion, or 6.6%, from $302.6 billion in the third quarter of 2019 and down year over year by approximately $20.4 billion, or 6.7%, from $303 billion in the fourth quarter of 2018.
“The number of underwater homes in the United States has fallen to the lowest level since the Great Recession. In general, Western states and those in the mid-Atlantic region are registering strong gains, compared to states in the Northeast and upper Midwest,” said Frank Martell, president and CEO of CoreLogic. “With unprecedented low rates and constrained supply, the housing market should continue to do well. Viewed against the backdrop of the recent stock market volatility, steady gains in home equity are a welcome source of stability.”
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The amount of equity for each property is determined by comparing the estimated current value of the property against the mortgage debt outstanding (MDO). If the MDO is greater than the estimated value, then the property is determined to be in a negative equity position. If the estimated value is greater than the MDO, then the property is determined to be in a positive equity position. The data is first generated at the property level and aggregated to higher levels of geography. CoreLogic data includes more than 50 million properties with a mortgage, which accounts for more than 95% of all mortgages in the U.S. CoreLogic uses public record data as the source of the MDO, which includes both first-mortgage liens and second liens, and is adjusted for amortization and home equity utilization in order to capture the true level of MDO for each property. The calculations are not based on sampling, but rather on the full data set to avoid potential adverse selection due to sampling. The current value of the property is estimated using a suite of proprietary CoreLogic valuation techniques, including valuation models and the CoreLogic Home Price Index (HPI). In August 2016, the CoreLogic HPI was enhanced to include nearly one million additional repeat sales records from proprietary data sources that provide greater coverage in home price changes nationwide. The increased coverage is particularly useful in 14 non-disclosure states. Additionally, a new modeling methodology has been added to the HPI to weight outlier pairs, ensuring increased consistency and reducing month-over-month revisions. The use of the enhanced CoreLogic HPI was implemented with the Q2 2016 Equity report. Only data for mortgaged residential properties that have a current estimated value are included. There are several states or jurisdictions where the public record, current value or mortgage data coverage is thin and have been excluded from the analysis. These instances account for fewer than 5% of the total U.S. population. The percentage of homeowners with a mortgage is from the 2016 American Community Survey. Fourth quarter of 2017 data was revised. Revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results.
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