Negative equity on the rise for homeowners, equity growth slows sharply

The uneven nature of the residential real estate market across the US is reflected in new data showing a rise in the share of homes that are in negative equity in the third quarter of 2024.

It’s the first time since Q4 2022 that the percentage of underwater homes has increased on a quarterly basis, rising 1.8% since the second quarter, or 30,000 homes, and taking the overall total to more than one million.

CoreLogic’s Home Equity Report reveals that while millions more homes are benefitting from rising prices, the pace of home equity growth has slowed sharply year-over-year.

The average homeowner with a mortgage saw the amount of equity in their home increase 5,700 in Q3 2024 compared to Q3 2023. In Q2 2024 the increase from a year earlier was $25,400. In percentage terms, that’s a slowdown from 8% in the second quarter of this year to just 2.5% in the third quarter.

Total home equity was around $17.5 trillion.

“As home prices flattened in the third quarter, home equity gains also slowed, even declined in some regions of the country,” said Dr. Selma Hepp, CoreLogic Chief Economist. “While home equity closely depends on home price changes, equity losses are also tied to natural disaster events since households can lose a lot of their equity following a catastrophe, particularly if not property insured. As a result, following Maui’s 2023 devastating wildfire, Hawaii now tops the list with largest decline in home equity.”

Hawaii has topped the list of largest declines in home equity (-$34K) but still outranks the rest of the US for average home equity at $700,000 which is more than double the national average ($311K) which is near a historical high. Colorado (-$17K) and Idaho (-$13K) were the second and third largest losers.

“Recent devastating weather events [e.g. Maui’s 2023 devastating wildfire] underscore the importance of maintaining that equity, particularly for households for which this is the only source of wealth,” added Hepp.

For homeowners in the Northeast, the home equity story remains positive with Rhode Island ($43K), New Jersey ($43K), and New York ($37K) experiencing the largest average national equity gains.