Home Equity Continues to Improve

4495CoreLogic reported US homeowners with mortgages saw their equity increase by $227 Billion in Q3 of 2016, up 3.1% annually.  This growth is associated with the improvement of the average loan-to-value ratio.  The average LTV ratio was 55.4%, down from 56% in mid-2016 and 57.3% in 2015.

Home equity for all homeowners (with and without mortgages) grew by $726 Billion, a year-over-year increase of 10.8%.  Additionally, 384,000 borrowers moved out of negative equity.  To date, 93.7% of all mortgaged properties are homes with positive equity, approximately 48 Million homes.

President and CEO of CoreLogic, Anand Nallathambi attributed the equity increase to price appreciation, listing “paydown of principal is the second key component of equity building.  Many homeowners have refinanced into shorter-term loans, such as a 15-year loan, and by doing so, they have significantly fewer mortgage payments and are able to build equity wealth faster.”

On a national average, homeowner equity increased by $13,000 for mortgaged properties.  The Pacific Northwest including California, Oregon, and Washington saw equity increases of about $25,000 to $30,000 while outliers Alaska, Connecticut, and North Dakota declined slightly.

Equity is the amount of the home actually owned, or the subtraction of the loan balance from the value of the home.   Homeowners build equity as the property value increases and the amount of the debt decreases.

Sources: The Balance, CoreLogic, MBA, Mortgage Daily

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