Home News Homeowners lost $1.5 trillion in equity since May, as home prices drop

Homeowners lost $1.5 trillion in equity since May, as home prices drop

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A home in Glendale, CA awaiting sale at a reduced asking price.

David Mcnew | Getty Images

The historic rise in home prices in the first two years of the pandemic has brought homeowners a record amount of new home equity.

But about $1.5 trillion of that has been lost since May, according to Black Knight, a mortgage software and analytics firm. The average borrower lost $30,000 in assets.

Homeowner wealth peaked last May at a combined $11.5 trillion after home prices rose 45% since the start of the pandemic.

As of the end of September, prices are still up 41% and the stock is still very strong. A borrower who bought a home before the pandemic has $5 trillion more in total than he did before the pandemic hit. This means he has $92,000 more in assets per borrower than in February 2020.

Ben Graboske, Black Knight’s president of data and analytics, said:

However, as mortgage rates rose last spring, home prices began to fall, significantly lowering their affordability. The average home’s monthly payments are down 20% on the mortgage and he’s up nearly $1,000 since the beginning of the year.

In 10% of major markets, including Las Vegas, Miami, Los Angeles, Phoenix, Tampa and San Diego, homeowners must spend twice the long-term median household income to make their monthly payments. Hmm.

That’s why home sales started to plummet in May, and prices have followed suit.

September house prices fell month-on-month for the third month in a row, but not as sharply as July and August. House prices typically fall in the summer and fall due to seasonal market downturns, but this year they fell more than usual.

Prices have fallen 2.6% since the end of June. This is his first three-month drop since late 2018 and his first three-month drop since early 2009 when the financial crisis hit. Since July, the median home price has fallen $11,560. However, the price is 10.7% higher than last September.

As of the end of September, the amount of collective equity available to borrowers while maintaining 20% ​​equity in their homes was down $1.17 trillion from May. This is his 10% drop and his first drop in so-called tappable equity in three years.

The percentage of borrowers who owe more on their mortgage than their home is worth is still very low at just 0.85%. But the numbers are starting to grow.

There are now less than 500,000 mortgage delinquent borrowers, but that’s still twice as many as in May. People who bought a home in the past year are at the highest risk of being submerged because they bought it during the peak of the market.

“While this is clearly a situation that requires careful and continued monitoring, given the circumstances, only 3.6% of the approximately 53 million U.S. mortgage holders are submerged or have their home equity 10% down. We have less than 100% of the pandemic,” Graboske added.

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