You’re rich! It may not always feel like it for homeowners with mortgage payments piled on top of life and household expenses, but home equity has spiked 10.8% over the past year for homeowners with mortgages.
CoreLogic, a consumer information company, estimates that American homeowners are $1 trillion richer (don’t spend it all in one place) because of an average of $17,000 in gained equity per homeowner. It is the largest growth in six years. That increased home value is more protective than enrichment because selling a higher-priced home would usually mean buying another home with an inflated value too.
“Over the past year, strong home price growth has created a record level of home equity for homeowners,” CoreLogic chief economist Frank Nothaft told CNBC. “The average family with a home mortgage loan had $194,000 in home equity in the third quarter. This provides an important buffer to protect families if they experience financial difficulties.”
The greatest increases occurred in Washington ($35,800 in average equity gain), California ($33,800) and Massachusetts ($31,200), while North Dakota ($5,400) experienced the lowest gain with steep coronavirus pandemic effects, according to CoreLogic.
Between housing values rising and the pandemic’s mortgage forbearance programs, foreclosure rates have hit historic lows in the U.S.
Millennials have entered the home-owning era of their lives, and the work-from-home and school-from-home lifestyles have prompted many Americans to re-evaluate their living arrangements. Supply can’t keep up with demand, driving home prices higher as mortgage rates drop lower.
The boom is expected to wane in 2021, but look where 2020 got you, homeowners. That is one good thing.