Average homeowner gains more than $30K in home equity over last year

The average homeowner has been building home equity over the past year with gains of about $33,400 between the first quarter of 2020 and the first quarter of 2021, according to the latest Homeowner Equity Report from CoreLogic, a mortgage data company. 

Overall, homeowners with mortgage loans, which account for about 62% of all homeowners in the U.S., saw a 19.2% increase in home equity from 2020 to 2021, according to the report. The collective gain across the U.S. came to $1.9 trillion. 

If you want to see how much you could get with a home equity line of credit or a cash-out refinance to help consolidate debts and pay down high-interest credit cards with today's low rates, you can use Credible to see your options in minutes. 

RISING HOME PRICES THREATEN TO OVERHEAT SUMMER HOUSING MARKET

Surging home prices have been bad news for homebuyers over the past year who are often bidding significantly above what a home is worth. However, these increases have benefited homeowners substantially. And for those homeowners struggling to make their mortgage payments, the risk of foreclosure after forbearance periods end is significantly lessened due to their ability to simply sell the home, often for much more than what they owe on it.

"Double-digit home price growth in the past year has bolstered home equity to a record amount. The national CoreLogic Home Price Index recorded an 11.4% rise in the year through March 2021, leading to a $216,000 increase in the average amount of equity held by homeowners with a mortgage," CoreLogic Chief Economist Frank Nothaft said. "This reduces the likelihood for a large number of distressed sales of homeowners to emerge from forbearance later in the year."

The home remodeling market surged during the pandemic as many homeowners used their home equity on home improvement projects through a home improvement loan, rather than try to buy a home in the competitive market. To see if you can get a low rate on home equity loan, visit Credible to see rates from multiple mortgage lenders at once.

REFINANCING A HOME EQUITY LOAN: WHY AND HOW TO DO IT

Negative equity, also referred to as underwater or upside down, applies to borrowers who owe more on their mortgages than their home's value. During the first quarter, the total number of mortgaged homes in negative equity decreased by 7% from the fourth quarter to 1.4 million homes, or 2.6% of all mortgaged properties, CoreLogic’s report showed.

"Homeowner equity has more than doubled over the past decade and become a crucial buffer for many weathering the challenges of the pandemic," CoreLogic President and CEO Frank Martell said. "These gains have become an important financial tool and boosted consumer confidence in the U.S. housing market, especially for older homeowners and baby boomers who’ve experienced years of price appreciation."

Because home equity is affected by home price changes, borrowers with equity in their home near the 5% mark above or below their home's value are most likely to move in and out of negative equity as home prices change. Looking at the first quarter of the 2021 book of mortgages, if home prices increase by 5%, 195,000 homes would regain equity; if home prices decline by 5%, 260,000 would fall underwater.

Mortgage lenders allow homeowners to take a line of credit on their home loan if they own more than 20% equity in their home. Visit Credible to compare options to refinance your mortgage without affecting your credit score.

CASH-OUT REFINANCE: PROS, CONS, WHEN TO GET ONE

Rising home prices caused equity to surge in the first quarter of 2021 and economists predict home prices will continue to rise. 

While this isn’t great news for homebuyers, homeowners with higher equity levels in their home are sheltered from foreclosure risk and have other options available for their mortgage loans, such as cash-out refinancing. 

If you want to refinance your mortgage, see what your options are and contact Credible to talk to a home loan expert who can answer all your questions. 

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