More mortgages went underwater in the third quarter, as growth in U.S. home equity noticeably slowed but still managed to maintain the upward trajectory it has ridden for over a year.
Home equity increased 2.5% on an annual basis between July and September, decelerating from the
Over the past year, U.S. homeowners saw property values jump up by a cumulative $425 billion, with total net homeowner equity rising to over $17.5 trillion,
Various factors contributed to the slowing, with equity even declining in some regions of the country, according to Corelogic Chief Economist Selma Hepp.
"While home equity closely depends on home price changes, equity losses are also tied to natural disaster events since households can lose a lot of their equity following a catastrophe, particularly if not property insured," she said in a press release. "As a result, following Maui's 2023 devastating wildfire, Hawaii now tops the list with the largest decline in home equity."
Hawaii homeowners saw an average loss of $34,000 over the past year. Along with the Aloha State, Colorado and Idaho, both of which saw a rush of new residents during the pandemic housing boom, similarly experienced declines in home equity. The mean drop in equity was $17,000 in Colorado and $13,000 in Idaho.
In spite of the decline, homeowners in Hawaii led the country in total equity with an average of $700,000.
"Nationally, average homeowner equity remains near a historical peak at over $311,000," Hepp said. "Still, recent devastating weather events underscore the importance of maintaining that equity, particularly for households for which this is the only source of wealth."
The Maui wildfire left more homeowners underwater, meaning their property value dropped below their remaining mortgage balance. The number of homes in negative equity grew by 30,000 from the second quarter, representing a 1.8% share. The underwater share expanded for the first time since late 2022.
The aggregate value of negative equity grew to approximately $324 billion by the end of the third quarter, up by $4.3 billion, or 1.3%, from $319 billion three months prior. Close to 1 million homeowners are now underwater, Corelogic said.
The third quarter overlapped with the lead-up to the presidential election, and past research suggested that over one-third of likely buyers might delay home-purchase decisions until November, potentially dampening demand and restraining price growth.
Still, research throughout the year showed
States with the greatest increase in home values were concentrated in the Northeast, with Rhode Island and New Jersey both seeing equity surge by an average of approximately $43,000 from one year earlier. New York followed with growth of $37,000.
