In 2021, homeowners with mortgages (63% of all properties) in the U.S. have gained a total of over $3.2 trillion, or a 29.3% increase in home equity since 2020. The number of residential properties with negative equity dropped by about 3% from 1.5 million homes in 2020, to 1.1 million homes in 2021.
Negative equity: Borrowers whose remaining mortgage balance is higher than the value of the home.
Home equity is affected by market price changes. When home prices change, borrowers close to the negative equity range (around 5%) will either move out of, or into negative equity. If home prices increase by 5%, 141,000 homes would regain equity. If home prices decrease by 5%, then 183,000 homes would move into negative equity.
According to reports from CoreLogic, 2021 home prices increased by 18% during Q4. That’s 10% higher compared to 2020, which showed an 8% increase at the end of Q4. The rising appreciation of homes year over year have decreased the national negative equity numbers to the lowest they’ve been in the last decade, with homeowners in California dropping below 1%. Homeowners on the west coast averaged the biggest increase in equity across the nation. California homeowners gained $117,000, Hawaii homeowners gained $128,300 and Washington homeowners gained $95,500.
The average homeowner in the U.S. gained roughly $55,300 in home equity during 2021. Insights from CoreLogic project that home prices will likely increase by 5% from Q4 2021 to Q4 2022. The Home Price Index for January 2022 shows home prices have already increased by 19% compared to January 2021. However, home equity growth is projected to slow over the remainder of 2022.