Home value gains have slowed. Are house prices stabilizing?
U.S. mortgage holders experienced a surge in home equity in the third quarter of 2024 – up 2.5% year over year to a total of $17.5 trillion nationwide. But that was down from the 8% growth in the second quarter, and negative equity also increased for the first time in two years, according to a KernLogic report.
CoreLogics Q3 2024 Homeowner Equity Insights Report showed that the total number of mortgaged homes with a negative equity increased by 3.5% compared to the second quarter. About 990,000 homes — or 1.8% of all U.S. properties — were considered “underwater” in the third quarter of 2024, meaning their outstanding mortgage balances represented more than the home’s value. But CoreLogic noted that negative equity was actually down 3% from Q3 2023.
The national total of negative equity stood at $324 billion at the end of the third quarter. That’s $4.3 billion more than the second quarter of 2024 and $9.1 billion higher than the third quarter of 2023. Conversely, positive equity has increased by $425 billion since the third quarter of 2023.
What causes the growth of negative equity? CoreLogic cites fluctuating house prices as a driving factor. Declines in home prices – which are generally a good thing for buyers – could hurt some current mortgage holders. According to CoreLogic, borrowers with positions near the breakeven equity point were more likely to fall into negative status as prices fell.
CoreLogic chief economist Selma Hepp also highlighted natural disasters as another factor behind the stock losses.
“While home prices leveled off in the third quarter, home value growth also slowed, even declining in some regions of the country,” Hepp said. “While home equity is highly dependent on changes in house prices, capital losses are also linked to natural disasters, as households can lose a large portion of their home equity after a catastrophe, especially if their properties are uninsured.”
Three states – Hawaii, Colorado and Idaho – experienced significant declines in home values in the third quarter of 2024. Hawaii saw the largest decline with an average loss of $34,000 per homeowner. Colorado and Idaho followed with average losses of $17,000 and $13,000, respectively. CoreLogic attributes the Aloha State’s equity decline to a catastrophic wildfire in 2023.
“Following the devastating Maui wildfire in 2023, Hawaii now tops the list of the largest declines in home equity. Nevertheless, Hawaiian homeowners still rank highly in home equity, with home equity averaging $700,000,” the report said.
Other states saw stock growth rise as home prices rose. Northeastern states saw the strongest stock gains and home price growth.
New Jersey (+8.1%) and Rhode Island (+7.5%) led home price growth during the year ending in the third quarter of 2024. New Jersey (+$43,000), Rhode Island (+ $43,000) and New York (+$37,000) ) saw the largest annual stock gains. On average, U.S. homeowners with mortgages gained $5,700 in equity compared to the third quarter of 2023 – well below the annual gain of $25,400 in the second quarter.
