LAS VEGAS — For the past 11 years, homeowners could count on the equity they held in their homes going in one direction– up. But that changed in the first quarter, with Colorado in the camp of states with bigger losses, according to a report Thursday from CoreLogic.
The losses aren’t big enough for most people to notice and most owners retain a huge cushion of equity that should help them get through a recession, said Selma Hepp, chief economist with CoreLogic on Thursday at the National Association of Real Estate Editors in Las Vegas
“It only matters if you have to sell your home,” she said.
U.S. homeowners with mortgages, which is roughly 63% of the total, saw their equity decline 0.7% on average in the first quarter of this year compared to the same period last year. That works out to a cumulative loss in wealth of $108.4 billion, or about $5,400 per borrower.
In Colorado, homeowners lost on average $23,000 in equity, or more than four times the loss per borrower measured nationally. But the declines were not as bad as what some states to the west experienced.
Washington led the nation with a $74,300 decline in average equity over the past year, while in California the drop was $59,600. Utah suffered a drop of $37,700 in equity, while in Idaho and Nevada, equity was down by $33,000 per home.
Still, the average homeowner, even with the decline in the first quarter, has built up $274,000 in equity — up significantly from $182,000 before the pandemic, Hepp said. Her forecast and those from other economists call for price gains to resume again as buying demand outpaces the supply of homes on the market.
That should help provide relief to buyers who purchased a home after prices peaked last spring. And it should help keep the share of homes with negative equity, where the debt owed on a home exceeds its resale value, in check.
The share of mortgaged homes with negative equity has increased by 4% over the past year to 1.2 million properties, or 2.1% of the total. And even in highly stressed housing markets like Los Angeles and San Francisco, the share of owners with negative equity remains minimal at only 0.9%, according to CoreLogic. In Colorado, that share is 1.7%.
The Federal Reserve is intent on bringing inflation back under a 2% annual rate, which will likely necessitate additional rate hikes and a higher unemployment rate, said Odeta Kushi, deputy chief economist First American Financial Corp.
“We will get more foreclosures as the labor market softens. I do anticipate foreclosures will rise, but nothing of the magnitude of the Great Financial Crisis,” said Kushi.
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