CoreLogic: US Home Borrowers See First Annual Home Equity Losses Since 2012 in Q1 2023, but Overall Mortgage Performance Remains Strong

• The average U.S. home loan borrower saw home equity decline by $5,400 year over year in the first quarter.
• Mortgage holders in Western states saw the largest year-over-year home equity losses in the U.S., which reflects recent regional price changes.

CoreLogic®, a leading global property information, analytics and data-enabled solutions provider, today released the Homeowner Equity Report (HER) for the first quarter of 2023. The report shows that U.S. homeowners with mortgages (which account for roughly 63% of all properties) saw home equity decrease by 0.7% year over year, representing a collective loss of $108.4 billion, and an average loss of $5,400 per borrower since the first quarter of 2022.

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Figure 1: Map of Average Year-Over-Year Equity Gain per Borrower (Graphic: Business Wire)

In the first quarter of 2023, U.S. homeowners with a mortgage lost a small amount of equity year over year for the first time since early 2012, while national combined equity followed suit. As in the fourth quarter of 2022, Western states posted the largest annual home equity losses: Washington (-$74,300), California (-$59,600) and Utah (-$37,700). The equity losses in those states reflect decelerating home prices, with all three posting annual declines in February and March, according to CoreLogic's Home Price Index.

Despite these declines, home equity remains solid, with the number of underwater properties unchanged since the fourth quarter of 2022. And although some major metro areas saw equity decline on an annual basis, years of rapid appreciation in places like Los Angeles and San Francisco, which have negative equity shares of 0.9%, is keeping homeowners in these metros in good standing.

"Home equity trends closely follow home price changes," said CoreLogic Chief Economist Selma Hepp. "As a result, while the average amount of equity declined from a year ago, it increased from the fourth quarter of 2022, as monthly home prices growth accelerated in early 2023."

"The average U.S. homeowner now has more than $274,000 in equity — up significantly from $182,000 before the pandemic," Hepp continued. "Also, while homeowners in some areas of the country who bought a property last spring have no equity as a result of price losses, forecasted home price appreciation over the next year should help many borrowers regain some of that lost equity."

Negative equity, also referred to as underwater or upside-down mortgages, applies to borrowers who owe more on their mortgages than their homes are currently worth. As of the first quarter of 2023, the quarterly and annual changes in negative equity were:

• Quarterly change: From the fourth quarter of 2022 to the first quarter of 2023, the total number of mortgaged homes in negative equity was unchanged, remaining at 1.2 million homes or 2.1% of all mortgaged properties.
• Annual change: From the first quarter of 2022 to the first quarter of 2023, the total number of homes in negative equity increased by 4% from 1.1 million homes or 2% of all mortgaged properties.

Because home equity is affected by home price changes, borrowers with equity positions near (+/- 5%), the negative equity cutoff, are most likely to move out of or into negative equity as prices change, respectively. Looking at the first quarter of 2023 book of mortgages, if home prices increase by 5%, 145,000 homes would regain equity; if home prices decline by 5%, 213,000 properties would fall underwater.

The next CoreLogic Homeowner Equity Report will be released in September 2023, featuring data for Q2 2023. For ongoing housing trends and data, visit the CoreLogic Intelligence Blog: www.corelogic.com/intelligence.

Methodology

The amount of equity for each property is determined by comparing the estimated current value of the property against the mortgage debt outstanding (MDO). If the MDO is greater than the estimated value, then the property is determined to be in a negative equity position. If the estimated value is greater than the MDO, then the property is determined to be in a positive equity position. The data is first generated at the property level and aggregated to higher levels of geography. CoreLogic uses public record data as the source of the MDO, which includes more than 50 million first- and second mortgage liens and is adjusted for amortization and home equity utilization in order to capture the true level of MDO for each property. Only data for mortgaged residential properties that have a current estimated value are included. There are several states or jurisdictions where the public record, current value or mortgage data coverage is thin and have been excluded from the analysis. These instances account for fewer than 5% of the total U.S. population. The percentage of homeowners with a mortgage is from the 2019 American Community Survey. Data for the previous quarter was revised. Revisions with public records data are standard, and to ensure accuracy, CoreLogic incorporates the newly released public data to provide updated results.

Source: CoreLogic

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About CoreLogic

CoreLogic is a leading global property information, analytics and data-enabled solutions provider. The company's combined data from public, contributory and proprietary sources includes over 4.5 billion records spanning more than 50 years, providing detailed coverage of property, mortgages and other encumbrances, consumer credit, tenancy, location, hazard risk and related performance information. The markets CoreLogic serves include real estate and mortgage finance, insurance, capital markets, and the public sector. CoreLogic delivers value to clients through unique data, analytics, workflow technology, advisory and managed services. Clients rely on CoreLogic to help identify and manage growth opportunities, improve performance and mitigate risk. Headquartered in Irvine, Calif., CoreLogic operates in North America, Western Europe and Asia Pacific. For more information, please visit www.corelogic.com.

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