Decade of economic expansion made homeowners safer in case of downturn

Bolstered home equity gains from rising prices put owners in a stronger position should another housing bubble be on the horizon, according to CoreLogic.

Homeowners gained a cumulative average of $93,600 from 2011 to 2018, according to the data provider's Role of Housing in the Longest Economic Expansion Report. Total home equity peaked at $15.8 trillion in 2019's opening quarter, nearly triple the $6.1 trillion in the first quarter of 2009.

Correspondingly, negative equity took a precipitous drop over the same time frame. From a negative equity share of 25.3% in 2010, the percentage of underwater mortgages dwindled down to 4.1% in the first quarter of 2019.

If another housing crisis occurs, consumers will have a safety net under them this time.

"Home prices started going up in 2011, which left current homeowners in a great equity position." Molly Boesel, principal economist at CoreLogic, said in an interview. "It's led to a lot of wealth build up. If or when we do have a downturn, the people who have mortgages will be in a lot better place than they were last time the market turned down."

The economy's still growing and unemployment and foreclosure rates are really low, two things that should continue for the time being.

"During the last nine years, the expansion has created more than 20 million jobs, raised family incomes and rebuilt consumer confidence," Frank Nothaft, chief economist at CoreLogic, said in the report. "The longest stretch of mortgage rates below 5% in more than 60 years has supplemented these factors. These economic forces have driven a recovery in home sales, construction, prices and home equity wealth."

However, that expansion and housing value growth are expected to slow down. There probably won't be a dramatic crisis like 2008, but the cyclicality of the market suggests a lull approaches.

Over the next two years, Boesel expects home prices to continue rising, but at "this more moderate rate we've seen recently. About a year ago they increased around a 6% rate, now they're down to like around 3.5%, 4% rate of increase. Then, equity would continue to build up but at a slower rate, too."

From June 2009 to May 2019, home prices appreciated by 50% and single-family rents increased 33% while median income grew at a much more stunted pace. The reduction in home price growth will bring in more potential buyers, especially millennials. With a surfeit of the demographic hitting or surpassing the prime age for first-time home buying, most of them expect to buy a house in the next five years. If those expectations become reality, that, paired with home price deceleration, should boost the homeownership rate in the near future.