Home equity gains set a record in second quarter

Over a year of stratospheric home price appreciation led to the largest equity gain in history.

Mortgaged homeowners amassed over $2.95 trillion in equity — putting an average of $51,470 in borrowers’ pockets — on an annual basis in 2021’s second quarter, according to CoreLogic. These surpassed the second-highest recorded totals of $1.98 trillion and $34,458 in the first quarter and dwarfed a revised $620 billion and $9,800 from the same period a year earlier. About 163,000 properties went from negative equity to positive quarter-over-quarter.

The quarter’s massive growth dropped the negative equity share to 2.3% — also a report record — from 2.6% in the first quarter and 3.3% a year ago. The aggregate unpaid principal balance fell to $268 billion from $273.2 billion quarterly and $286.8 billion annually.

The data and analytics provider expects the record levels of equity to keep building going forward and the increases will further provide distressed borrowers a buffer from foreclosure.

“For those most impacted by the pandemic, equity gains will help play a critical role in staving off foreclosure,” Frank Martell, president and CEO of CoreLogic, said in the report. “Based on projected increases in economic activity and home values over the next year, we expect to see further gains in equity and a corresponding drop in negative equity, forbearance rates and foreclosure.”

The West accounted for the largest gains at the state level. California borrowers had an average annual gain of $116,288, just beating out Washington’s average of $102,837. Rounding out the top five were Idaho with $97,013, Hawaii with $86,398 and Utah with $80,718. The smallest growth came in North Dakota at $10,611, followed by $14,713 in Iowa, $17,335 in Oklahoma and $19,914 in Alaska.

California also led the nation with the lowest percentage of underwater properties at 0.84%, closely trailed by 1.14% in Oregon and 1.16% in Arizona. Overall, 20 states had negative equity shares below 2%. Louisiana had the highest share at 7.76%, ahead of 5.19% in Iowa and 4.66% in Illinois.