It is hardly a surprise given the rapid
increase in home prices, but homeowners gained another $1.9 trillion in equity
in the first quarter of this year. CoreLogic’s Homeowner Equity Report says
homeowners with mortgages, (about 62 percent of all properties) saw an increase
of 19.6 percent compared to the first quarter of 2020. This is an average
annual gain of $33,400 per household.

At the same time, the number of homeowners
who were underwater, owning more on their mortgages than the value of their
home, decreased by 24 percent over the 12 months ending in March, 7 percent in
the first quarter alone. This meant that 450,000 properties emerged from negative
equity
during the year, leaving 1.4 million homes, 2.6 percent of those with a
mortgage, underwater.  

The
issue of negative equity has taken on additional importance with the large
number of homeowners who have been in forbearance, some for over a year, as
past due payment balances rise. This accumulation of equity has given these homeowners some
leeway in deciding on their post-forbearance options.
The company says, “In
contrast to the financial crisis, when many borrowers were underwater, borrowers
today who are behind on mortgage payments can tap into their equity and sell
their home rather than lose it through foreclosure. These conditions are
reflected in a recent CoreLogic survey, with 74 percent of current
homeowners with mortgages noting they are not concerned with owing more on
their home than it is worth within the next five years.”  

The national aggregate value of
negative equity was approximately $273 billion at the end of the reporting
period, approximately $8.1 billion less than at the end of the fourth quarter
of 2020 and down year over year by about $13.3 billion from $286.3 billion in
the first quarter of 2020.  

Because equity is affected by home
price changes, borrowers with equity positions near (+/- 5 percent) the
negative equity cutoff are most likely to move out of or into negative equity
as prices change, respectively. Looking at the first quarter of 2021 book of
mortgages, if home prices increase by 5 percent, 195,000 homes would regain
equity
; if home prices decline by that same percentage, 260,000 would fall
underwater.

By Jann Swanson , dated 2021-06-11 08:42:30

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Courtesy of Mortgage News Daily

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