Four states and Washington, D.C. record annual home equity declines

Despite the housing market cool down, homeowners with mortgages, which accounts for roughly 63% of all properties, gained $1 trillion in equity between the fourth quarter of 2021 and the fourth quarter of 2022, according to a report released Thursday by CoreLogic.

On average, U.S. homeowners with mortgages gained $14,300 in equity, a jump of 7.3%, from Q4 2021 to Q4 2022. While this is still a strong gain, it is down markedly from the average yearly equity increase of $63,100 recorded in the first quarter of 2022.

Homeowners in Florida recorded the highest level of annual equity growth at an average of $49,000 in Q4 2022. This trend looks to be continuing as prices were up 13.4% year over year in Florida in January.

Hawaii (+$37,100) and New Jersey (+$35,900) rounded out the top three states with the highest annual equity gains in the fourth quarter of 2022.

On the other end of the spectrum, Idaho (-$21,400), Washington (-$18,900), California (-$8,500), Utah (-$4,600) and Washington, D.C. (-$8,300), all posted year-over-year equity decreases in the fourth quarter of 2022.

“While equity gains contracted in late 2022 due to home price declines in some regions, U.S. homeowners on average still have about $270,000 in equity more than they had at the onset of the pandemic,” Selma Hepp, the chief economist at CoreLogic, said in a statement. “Even in Idaho, where borrowers were the most vulnerable to losses, the typical homeowner with a mortgage still has about $250,000 in remaining home equity.”

Year over year, the total number of homes in negative equity, meaning that the borrower owes more on their mortgage than they home is currently worth, was down 2% to 1.2 million homes or roughly 2.2% of all mortgage properties in the fourth quarter of 2022.

Looking ahead, based on the Q4 2022 book of mortgages, if home prices fall by 5%, 215,000 more properties would fall underwater.

“With 66,000 borrowers entering negative equity in the fourth quarter, the total number of underwater properties is now approaching levels seen at the end of 2021, which was the lowest since the Great Recession,” Hepp said. “The new hot spots for equity declines are largely markets that have seen the most significant home price deceleration, including Boise, Idaho; the San Francisco Bay Area; cities in Utah; Phoenix and Austin, Texas.”