Tight supply driving home prices up helped homeowners gain $26,000 on average in the fourth quarter of 2020.
The latest CoreLogic Home Equity Report showed that approximately 62% of homeowners with mortgages saw an average equity increase of 16.2% year over year. This represented a collective gain of over $1.5 trillion for Q4 2020.
“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 CoreLogic chief economist Frank Nothaft. “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.”
The robust home equity growth has also lowered the risk of homes falling underwater and pushing distressed sales into the market, according to the report. Quarter over quarter, the total number of mortgaged homes in negative equity decreased by 8% to 1.5 million homes or 2.8% of all mortgaged properties. The national value of negative equity was around $280.2 billion, down from $283.6 billion in Q3 2020.
States with strong home price growth posted the largest average equity gains, including California ($54,500), Idaho ($48,500), Washington ($47,200). Meanwhile, North Dakota experienced the lowest average equity gain in the fourth quarter at $7,900.
“Positive factors like record-low interest rates and a booming housing market encouraged many families to enter homeownership,” said Frank Martell, president and CEO of CoreLogic. “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.”