April 23, 2024 3:51 PM
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Q4 2023 Brought Fewer Underwater Homes – The Mortgage Note

The number of underwater homes in the U.S. dropped in Q4 2023 as home prices continued soaring, adding to the property wealth of American homeowners.

Equity rose by approximately $24,000 YOY for the average borrower, according to new data from CoreLogic.

A home is underwater if it has negative equity – that is, if it’s worth less than the homeowners owe.

Quarter-over-quarter, the number of homes with negative equity slipped by 1.1%, accounting for just 1.8% of all mortgaged properties, the lowest number ever recorded by CoreLogic.

Annually, underwater mortgages were down by 15%.

“Rising home prices continue to fuel growing home equity, which, at $298,000 per average borrower remained near historic highs at the end of 2023,” said Dr. Selma Hepp, chief economist for CoreLogic.

“More importantly, home price growth over the last year has helped lift the equity of homeowners who were underwater because of 2022 price declines.”

Homeowners in Rhode Island, New Jersey, and Massachusetts saw the greatest gains, clocking in more than $50,000 extra in the fourth quarter.

Miami remained the strongest metro, however, as homeowners there gained an incredible $63,200 from the year prior.

Texas is the only state where homeowners experienced losses in home equity, down $6,000 YOY.

Rising equity is benefitting current homeowners, but it’s a double-edged sword.

First-time buyers are especially impacted, as they don’t have their own equity to fall back on when purchasing a new home, making it harder to compete in areas with elevated prices.

Miami, for example, has seen some of the most significant price growth since the pandemic as wealthy work-from-homers flocked there for its lifestyle benefits. Now, Mayor Daniella Levine Cava is proposing a new property-tax-based debt package to finance affordable housing projects. She hopes to raise $800 million.

“Cost of development is extremely high because land is so limited,” Cava said in an interview, adding that the “$800 million will go very fast.”

Other high-traffic areas, especially vacation hotspots and resort towns, are seeing home prices so high that they can’t fill positions at schools and hospitals due to the lack of places for workers to live.

In the aftermath of the Great Recession, 12 million homes were underwater.

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