Homeowners Have Lost $1.5 Trillion in Equity Since May as Housing Market Continues Decline

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The U.S. housing market giveth and the U.S. housing market taketh away — and lately, it has been taking away equity at blazing speed. Equity among mortgaged homes in the United States is now nearly $1.5 trillion off its May 2022 peak, according to the Black Knight Home Price Index, which was released this week.

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The index found that median home prices fell 0.52% in September — the third straight month of declines. About $1.3 trillion in recently added home equity vanished from the market during the third quarter alone, a 7.6% decrease. That was the largest quarterly dollar decline on record and the biggest on a percentage basis since 2009.

Equity has declined by $1.5 trillion from its May peak, a dip of 8.4%. The equity of the average borrower is down roughly $30,000 from earlier this year.

The annualized appreciation of home values slowed to 10.7% in September, though that is still more than twice the longer-term norm. While the number of underwater homeowners has climbed by nearly 275,000 over the past four months, there are still fewer than 500,000 homes underwater nationwide. Most that are underwater were purchased in 2021 or 2022.

“Historically speaking, that is still extremely low,” Black Knight Data & Analytics President Ben Graboske said in a press release.

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From a historical perspective, the U.S. housing market remains strong in terms of home values and sales. But that’s mainly because it rose to record heights earlier this year. Recent trends do not bode well due to the combination of inflation, economic uncertainty and rising mortgage rates.

Pending home sales in September declined for the fourth straight month, according to a report issued in October by the National Association of Realtors. All four major regions recorded month-over-month and year-over-year declines in transactions.

“Persistent inflation has proven quite harmful to the housing market,” NAR Chief Economist Lawrence Yun said in a statement. “The Federal Reserve has had to drastically raise interest rates to quell inflation, which has resulted in far fewer buyers and even fewer sellers.”

Yun also noted that new home listings are down compared to a year ago because many homeowners are unwilling to give up the rock-bottom, 3% mortgage rates that they locked in prior to 2022.

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Home prices began to weaken in the spring as mortgage rates began to rise, CNBC reported. The monthly payment on the average home with a 20% down payment on a mortgage is up nearly $1,000 since the beginning of 2022.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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