Home equity returns have slowed. Are house prices stabilizing?
US owners experienced growth in the third quarter of 2024 – up 2.5% year-over-year to a national total of $17.5 trillion. But that was lower than the 8% increase in the second quarter, and negative equity also increased for the first time in two years. CoreLogic report.
CoreLogic's showed that the total number of negative equity mortgages rose 3.5% from the second quarter. In Q3 2024, about 990,000 homes, or 1.8% of all properties in the U.S., were considered “underwater,” meaning their outstanding mortgage balance was greater than the home's value. But CoreLogic noted that negative equity actually fell 3% from 3Q2023.
The national aggregate value of negative capital amounted to 324 billion dollars at the end of the third quarter. This is up $4.3 billion from Q2 2024 and $9.1 billion from Q3 2023. Conversely, positive home equity has increased by $425 billion since the third quarter of 2023.
What causes negative equity growth? CoreLogic points to volatility as a driving factor. Falling home prices — usually a good thing for buyers — can hurt some current mortgage holders. According to CoreLogic, borrowers with positions close to the break-even point were more likely to go into negative status as prices fell.
CoreLogic's chief economist also highlighted that as another factor behind the losses in capital.
“As home prices leveled off in the third quarter, home equity returns also slowed, and even declined in some parts of the country,” Hepp said. “While home equity is highly dependent on changes in home prices, equity losses are also associated with natural disaster events, as households can lose much of their equity after a disaster, especially if the property is uninsured.”
Three states – and – saw significant declines in home equity in the 3rd quarter of 2024. Hawaii saw the biggest drop, with an average loss of $34,000 per homeowner. Colorado and Idaho followed with average losses of $17,000 and $13,000, respectively. CoreLogic reports that the Aloha State's capital drawdown is due in 2023.
“After the devastating 2023 wildfires in Maui, Hawaii now leads the list with the largest decline in home equity. Despite this, Hawaii homeowners still rank high in home equity, with an average equity of $700,000,” the report states.
Other states have seen equity growth due to rising home prices. Northeast states saw the strongest capital gains and home price growth.
(+8.1%) and (+7.5%) led to house price growth in the year ending Q3 2024. New Jersey (+$43,000), Rhode Island (+$43,000) and (+$37,000) had the largest annual capital gains. increases. On average, U.S. homeowners with a mortgage gained $5,700 in equity over the third quarter of 2023, well below the $25,400 annual gain seen in the second quarter.
