Mortgage holders in the US experienced an increase in the value of houses in the third quarter of 2024 – it increased by 2.5% year-over-year to a total of $17.5 trillion nationwide. But that was down from 8% growth in the second quarter, and negative equity also rose for the first time in two years, according to the CoreLogic report.
CoreLogic’s Q3 2024 Homeowner Equity Insights report showed that the total number of mortgages with negative equity increased 3.5% from the second quarter. About 990,000 homes – or 1.8% of all US properties – were considered “underwater” in Q3 2024, meaning their mortgage balance was more than the home’s value. But CoreLogic noted that negative equity decreased by 3% from Q3 2023.
The nation’s total negative equity was $324 billion at the end of the third quarter. That’s up $4.3 billion from Q2 2024 and $9.1 billion over Q3 2023. Conversely, homeowner equity increased $425 billion from Q3 2023.
What causes negative equity growth? CoreLogic cites changing housing prices as a leading factor. A drop in home prices — often a good thing for buyers — can hurt some current mortgage holders. Borrowers with positions near the breakeven point are likely to move into negative territory as rates fall, according to CoreLogic.
CoreLogic’s chief economist, Selma Hepp, also highlighted natural disasters as another cause of equity losses.
“As home prices fell in the third quarter, home equity gains also fell, even in some regions of the country,” Hepp said. “While home equity is highly dependent on changes in home prices, equity losses are also linked to natural disasters as households can lose much of their equity following a disaster, especially if they are uninsured.”
Three states – Hawaii, Colorado and Idaho – saw significant home equity declines in Q3 2024. Hawaii saw the largest decline with an average loss of $34,000 per homeowner. Colorado and Idaho followed with losses of between $17,000 and $13,000 respectively. CoreLogic predicts the Aloha State’s risk of a catastrophic wildfire in 2023.
“Following the devastating Maui wildfires of 2023, Hawaii now tops the list with the largest reduction in home equity. Even so, Hawaii homeowners still have the highest level of home equity, with equity of about $700,000,” the report notes.
Some states have seen equity growth due to rising home prices. Northeastern states saw the strongest equity gains and home price growth.
New Jersey (+8.1%) and Rhode Island (+7.5%) led the charge for home price growth during the year ending Q3 2024. New Jersey (+$43,000), Rhode Island (+$43,000) and New York (+$37,000 ) had the largest annual increase. On average, American homeowners with mortgages gained $5,700 in equity compared to Q3 2023 – well below the annualized gain of $25,400 seen in the second quarter.
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