Negative Equity Spikes in 4Q 2018

U.S. homeowners with mortgages increased their equity by an average $9,700 between the fourth quarter of 2017 and one year later.  Data from CoreLogic reveals that western states gained the most, although most states posted an increase.

The top 3 states for equity gains were Nevada (average of approx. $29,400), Hawaii (average of approx. $26,900), and Idaho (average of $24,700).

“The increase in home equity over the past several years provides homeowners with the means to finance home remodels and repairs,” said Frank Martell, president and CEO of CoreLogic.  Home-equity loans provide a low-cost method to finance home-improvement spending. These expenditures are expected to rise 5% in 2019.

But for 35,000 homeowners with mortgages, the fourth quarter of 2018 saw them added to those who owe more than their home is worth. The total number of underwater homes rose 1.6% quarter-over-quarter to 2.2 million, a 4.2% share of all homes with a mortgage.

The figures show that negative equity rose on a quarterly basis for the first time since Q4 2015 but on an annual basis there was a 14% decline (351,000) in underwater homes (total: 2.6 million homes, 4.9% of all homes with a mortgage).

The national aggregate value of negative equity was approximately $300.3 billion at the end of the fourth quarter of 2018, up approximately $17.4 billion from the third quarter of 2018 and up year-over-year by approximately $14.4 billion.

Despite the rise in quarter-over-quarter negative equity, the outlook is positive and could see hundreds of thousands of owners regaining equity.  CoreLogic predicts there will be a 4.5% increase in the national index from December 2018 to the end of 2019. “If all homes experience this gain, this would lift about 350,000 homeowners from being underwater and restore positive equity” said Dr. Frank Nothaft, chief economist for CoreLogic.

Source:  CoreLogic, Mortgage Professional America