Fast-rising home prices may be a roadblock for buyers, but they are putting some homeowners on Easy Street. As home prices rise, so does the percentage of home equity for those owners with a mortgage.
Home equity jumped 13.3 percent in the first quarter of this year compared from a year earlier, according to CoreLogic. For the average borrower, that translates to $16,300 in additional home equity gained during the year, or a collective $1.01 trillion. That is the biggest gain in four years.
Despite the big value gains in the past few years, 2.5 million borrowers or 4.7 percent of all homeowners with a mortgage are still underwater on their home loans, meaning they owe more than the homes are currently worth. However, in the first quarter of this year, 84,000 borrowers came up from underwater, regaining equity.
The negative equity rate fell 21 percent from a year earlier, when just over 3 million borrowers were underwater. Negative equity peaked in 2009 at 26 percent of all mortgaged properties.
“Home-price growth has accelerated in recent months, helping to build home-equity wealth and lift underwater homeowners back into positive equity, the primary driver of home equity wealth creation,” said Frank Nothaft, CoreLogic’s chief economist. “The CoreLogic Home Price Index grew 6.7 percent during the year ending March 2018, the largest 12-month increase in four years.”