What High Home Equity and Record Low Delinquencies Mean for Housing

There has been more doom and gloom in the media about the housing market. With so much economic uncertainty, fears of a recession, rising inflation and higher costs for food, gas and other necessities, many are wondering:

Will people be able to pay their mortgage?

Is another housing crisis ahead?

While these are serious concerns, it’s important to analyze the whole picture as there are some important factors the media isn’t considering. First, the current delinquency rates for mortgages are at exceptionally low levels and second, homeowners have record levels of equity that they will protect. 

To review these numbers, let’s consider two recent reports from CoreLogic that speak to the health of the housing market. In their Loan Performance Insights report for March that was released June 14, loans 30 days or more past due declined from 3.2% in February to 2.7% in March. Loans seriously delinquent or 90 days plus declined from 1.6% to 1.4%. Homes in foreclosure remained at 0.2%, which is a multi-decade low.

Molly Boesel, Principal Economist for CoreLogic, noted that, “The share of borrowers in any stage of delinquency was at an all-time low in the first quarter of 2022.”

In addition, CoreLogic’s Homeowners Equity Insights report for the first quarter of this year showed that homeowners have seen equity rise by 32% since the first quarter of last year. In the first quarter of 2022, the average homeowner gained approximately $64,000 in equity during the past year. Homes that are underwater or with negative equity decreased by 23% compared to the first quarter of 2021, while the total number of homes with negative equity fell from 1.4 million to 1.1 million homes, which is only 2% of mortgaged properties.

But what does this look like compared to the entire housing market? Looking at the whole picture, the figures are even more positive.

There are 89 million homes in the United States, of which 62% or 55 million have a mortgage. As noted above, 1.1 million or 2% of those mortgaged properties have negative equity, but when we calculate this number as a percentage of the entire U.S. housing market of 89 million homes, only 1.2% of all properties are underwater.

What’s more, CoreLogic estimates that if we see 5% appreciation this year, which we are certainly on track to do, another 130,000 homes would regain positive equity, meaning that only 1% of all properties would have negative equity.

This data speaks to healthy aspects of the housing market and demonstrates the importance of understanding the whole picture.

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