Homeowner’s Equity Insights

Despite the pandemic’s effect on most economies, the housing market across the United States saw generally positive growth. While people were stuck at home, it seems the decision to improve life at home was popular. Average home prices increased, and homeowners saw their equity climb back. The steep growth that resembles the 2008 financial crisis raises concerns of some. But never fear, smart lenders have built a foundation for homeowners’ equity allowing a safety net to become a market-norm.

Buyers, sellers, investors, and lenders have all experiences a period of growth. In contrast to the financial crisis, homeowners report little concern for owning more on their mortgage than their home is worth. Nationally, positive equity for all mortgage holders grew by 19.6%, or roughly $1.9 trillion.

To the consumer, this entails that the value of homes are rising, and the lending market is less risky. The immense gain in equity is what differs this period from the prior crises. Preventing foreclosures and financial safety nets on mortgages are built upon positive equity. Between September of 2020 and March of 2021, over 450,000 homes went from underwater to positive ground.

Within only one year, the US housing market experienced a 24% decrease in negative equity share of mortgage holders. This is a result of the change in house prices and individual debt levels. Constant fluctuations are not new to any economy, but they do put homeowners near the line between positive or negative equity at risk. If home prices were to increase by 5%, on average, 195,000 homeowners would regain equity. While 260,000 homes would fall under the negative equity line if home prices were to decrease by 5%.

The nationwide year at home presented us with all sorts of surprises, one of which being the resilience of homeowners. Positive growth has spread nationwide, Colorado being among one of the more notable states! The Rocky Mountain State holds only 1.9% of the national negative equity share. Denver, Colorado’s largest metropolitan area, accounts for 1.3% of the national share.

What does this entail for the average Coloradan? Our economies are growing every day, communities are expanding, and local life is getting a new resurgence. Within the past year the average CO homeowner gained $47,000 in equity, greater than the national average of $33,400. It’s safe to say our state is growing, and homeowners are gaining from it.

Despite the pandemic and its restrictions on normal life, the past year has proven that home matters most. Homeowners are regaining equity they may have lost, and a new sense of financial security sets this period apart from what we’ve known in the past. Whether a new home office or a new home all together, reinvesting in space is one of the many lessons learned from the year of social distance.

KEY TERMS:

Negative Equity: borrowers who owe more on their mortgages than their home is worth, caused by a fall in home value, a rise in debt, or both.

CoreLogic Report