Dive Brief:
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The roughly 91,000 U.S. homeowners with mortgages (63% of all homeowners) saw their combined equity increase 11.2%, or $766.4 billion, since Q1 2016, according to CoreLogic. The average homeowner’s equity increased $13,400 from Q1 2016 to Q1 2017.
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The number of underwater residential properties fell 3% from Q4 2016 to 3.1 million homes in Q1 2017, representing 6.1% of mortgaged homes. That figure is down 24%, or 4.1 million homes, year-over-year and is markedly below its peak of 26% in Q4 2009.
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Equity increased the most year-over-year in Washington at $37,900, while Texas reported the highest percentage of homes with positive equity (98.4%). Nevada had the highest percentage of underwater homes (12.4%).
Dive Insight:
Continued home-price growth is driving the recovery in home equity lost during and after the recession. Earlier this month, CoreLogic reported that home prices increased 1.6% from March to April, as values climbed 6.9% year-over-year. Analysts forecast prices to increase 5.1% from April 2017 to April 2018, mirroring steady growth in predictions since the beginning of this year.
While the current price growth favors sellers, many owners looking to sell are wary of listing their homes due to concerns they might not be able to find a replacement in time. In turn, many are listing their homes at lower prices than they could likely get, whether to expedite the sales process or because the current climate of price increases continues to complicate the price-setting process.
As homeowners hesitate to trade up, lagging new and existing inventory in the entry-level segment continues to dampen first-time buyers' prospects. Though analysts predict the rate of home-price increases could begin to slow as more inventory comes online, the market will continue to respond to the already-high and still-rising prices.
April saw its new-, existing- and pending home sales falter alongside a drop-off in single- and multifamily permits — concerning some analysts that the new construction needed to loosen up the market won’t be delivered in sufficient volume. Still, a slight boost in the month's single-family home starts and an uptick in builder optimism in May could signal inventory growth is on its way.