U.S. homeowners with mortgages (roughly 63% of all homeowners) saw their equity increase by a total of $227 billion in the third quarter – an increase of 3.1% compared with the second quarter, according to CoreLogic.
Year over year, home equity grew by $726 billion, representing an increase of 10.8% compared with the third quarter of 2015. The improvement is due mainly to rising home prices.
As a result, about 384,000 borrowers moved out of negative equity in the third quarter, bringing the percentage of homes with positive equity to 93.7% of all mortgaged properties, or approximately 47.9 million homes.
Still, about 3.2 million, or 6.3% of all homes with a mortgage, remain underwater.
Still, this is a decrease of 10.7% compared with the second quarter, when 3.6 million homes, or 7.1% of mortgaged properties, were underwater.
What’s more, it is a decrease of 24.1% compared with 4.2 million underwater homes, or 8.4% of mortgaged properties, in the third quarter of 2015.
The national negative equity rate peaked at 26% of all mortgaged residential properties in the fourth quarter of 2009, according to CoreLogic’s data.
Frank Nothaft, chief economist for CoreLogic, says home equity rose by an average of $12,500 per homeowner over the last four quarters.
“There was wide geographic variation, with homeowners in California, Oregon and Washington gaining an average of at least $25,000 in home equity wealth, while owners in Alaska, North Dakota and Connecticut had small declines, on average,” Nothaft says in a statement.
Anand Nallathambi, president and CEO of CoreLogic, points out that in addition to rising home prices, increased prepayments in the past year have also helped many homeowners reduce their negative equity positions.
“Paydown of principal is the second key component of equity building,” he says. “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.”
For more, including a regional breakdown of where home equity is rising the fastest, click here.