Equity continued to mount in the fourth quarter of 2020, with mortgage-carrying American homeowners collectively gaining more than $1.5 trillion in equity year over year, according to CoreLogic.
That’s an average gain of $26,300 per homeowner since the fourth quarter of 2019, highest since the fourth quarter of 2013. Collectively, homeowners with mortgages (which accounts for some 62% of all properties in the country) logged an annual equity increase of 16.2%, driven by strong ongoing price gains fueled by soaring demand and minuscule inventory.
“Compared with a year earlier, home prices in December 2020 were up sharply — 9.2%, according to the CoreLogic Home Price Index — boosting the amount of home equity for the average homeowner with a mortgage to more than $200,000,” said Frank Nothaft, CoreLogic’s chief economist. “This equity growth has enabled many families to finance home remodeling, such as adding an office or study, further contributing to last year’s record level in home improvement spending.”
For many other homeowners, the stout equity growth has helped build a cushion against pandemic-induced financial stress. With uncertainty coloring the near term and the purchase market remaining favorable, the prospects of added security may propel demand even further, according to CoreLogic President and CEO Frank Martell.
“Positive factors like record-low interest rates and a booming housing market encouraged many families to enter homeownership,” he said. “This growing bank of personal wealth that homeownership affords was noticed by many but in particular for first-time buyers who want a piece of the cake. As a result, we may see more of those currently renting start to enter the market in the near future.”
Rising home values have also helped drive down negative equity — when borrowers owe more on their mortgages than their homes are currently worth. Between the third and fourth quarters of 2020, the total number of mortgaged homes with negative equity fell by 8% to 1.5 million homes, representing 2.8% of all mortgaged properties. Year over year, that number decreased from 1.9 million homes during the fourth quarter of 2019.