As home prices continue to see positive movement, despite some slows throughout 2023, home equity continues to grow for homeowners across the country.

CoreLogic’s homeowner equity report for Q4 2023 found that homeowners with mortgages (which account for roughly 62% of all properties) saw a home equity increase of 8.6% year-over-year.

This increase represents a collective gain of $1.3 trillion and an average increase of slightly more than $24,000 per borrower since Q4 2022. As the report states, this brought total net homeowner equity to more than $16.6 billion at the end of 2023.

Key highlights:

• Three Northeastern states posted the country’s highest annual equity gains in Q4: Rhode Island ($62,000), New Jersey ($55,000) and Massachusetts ($53,000).
• The equity growth in those states is thanks in part to the recent healthy home price increases in that area of the country. According to CoreLogic’s latest Home Price Insights report, Rhode Island and New Jersey led the nation for year-over-year appreciation in January, a respective 13.2% and 11.6%.
• Negative equity, also referred to as underwater or upside-down mortgages, applies to borrowers who owe more on their mortgages than their homes are currently worth.
• From Q3 to Q4 2023, the total number of mortgaged homes in negative equity decreased by 1.1%, to 1 million homes or 1.8% of all mortgaged properties.
• From Q4 2022 to Q4 2023, the total number of homes in negative equity decreased by 15%, from 1.2 million homes or 2.1% of all mortgaged properties.
• Because home equity is affected by home price changes, borrowers with equity positions near (+/- 5%), the negative equity cutoff, are most likely to move out of or into negative equity as prices change, respectively.
• Looking at the Q4 2023 book of mortgages, if home prices increase by 5%, 114,000 homes would regain equity; if home prices decline by 5%,162,000 properties would fall underwater.

Major takeaway:
“Rising home prices continue to fuel growing home equity, which, at $298,000 per average borrower, remained near historic highs at the end of 2023,” said Dr. Selma Hepp, chief economist for CoreLogic. “By extension, at 43%, the average loan-to-value ratio of U.S. borrowers has also remained in line with record lows, which suggests that the typical homeowner has notable home equity reserves that can be tapped if needed.”

Hepp continued, “More importantly, home price growth over the last year has helped lift the equity of homeowners who were underwater because of 2022 price declines—meaning that their mortgage amount was higher than the value of their properties. Now, slightly more than 1 million borrowers are underwater, the lowest number recorded in CoreLogic historic data and significantly below the 12 million seen coming out of the Great Recession.”

For the full report, click here.

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