{"id":976,"date":"2023-06-15T17:15:50","date_gmt":"2023-06-15T17:15:50","guid":{"rendered":"https:\/\/johnsonteamrealestate.com\/?p=976"},"modified":"2023-06-15T17:15:50","modified_gmt":"2023-06-15T17:15:50","slug":"a-drop-in-equity-doesnt-mean-low-equity","status":"publish","type":"post","link":"https:\/\/johnsonteamrealestate.com\/index.php\/2023\/06\/15\/a-drop-in-equity-doesnt-mean-low-equity\/","title":{"rendered":"A Drop in Equity Doesn\u2019t Mean Low Equity"},"content":{"rendered":"\n
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You may see media coverage talking about a drop in homeowner equity. What\u2019s important to understand is that equity is tied closely to home values. So, when home prices appreciate, you can expect equity to grow. And when home prices decline, equity does too. Here\u2019s how this has played out recently. <\/p>\n\n\n\n

Home prices rose rapidly during the \u2018unicorn\u2019 years<\/a>. That gave homeowners a considerable equity boost. But those \u2018unicorn\u2019 years couldn\u2019t last forever. The market had to moderate at some point, and that\u2019s what we saw last fall and winter. <\/p>\n\n\n\n

As home prices dropped slightly in the back half of 2022, equity was impacted. Based on the most recent report<\/a> from CoreLogic<\/em>, there was a 0.7% dip in homeowner equity over the last year. However, the headlines reporting on that change aren\u2019t painting the whole picture. The reality is, while home price depreciation<\/a> during the second half of last year caused equity to drop, the data shows homeowners still have near record amounts of equity<\/strong>. <\/p>\n\n\n\n

The graph below helps illustrate<\/a> this point by looking at the total amount of tappable equity in this country going all the way back to 2005. Tappable equity is the amount of equity available for homeowners to access before hitting a maximum 80% loan-to-value ratio (LTV). As the data shows, there was a significant equity boost during the \u2018unicorn\u2019 years<\/a> as home prices rapidly appreciated (see the pink in the graph below<\/em>).<\/p>\n\n\n\n

But here\u2019s what\u2019s key to realize \u2013 even though there\u2019s been a small dip, total homeowner equity is still much higher than it was before the \u2018unicorn\u2019 years.<\/strong><\/p>\n\n\n\n

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And there\u2019s more good news. Recent home price reports show the worst home price declines<\/a> are behind us, and prices have started to go up<\/a> again. As Selma Hepp, Chief Economist at CoreLogic<\/em>, explains<\/a>:<\/p>\n\n\n\n

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\u201cHome equity trends closely follow home price changes. As a result, while the average amount of equity declined from a year ago, <\/em>it increased from the fourth quarter of 2022, as monthly home prices growth accelerated in early 2023<\/em><\/strong>.\u201d<\/em><\/p>\n<\/blockquote>\n\n\n\n

The last part of that quote is particularly important and is the piece of the puzzle the news is leaving out. To further emphasize the positive turn we\u2019re already seeing, experts say home prices are forecast to appreciate at a more normal rate over the next year. In the same report, Hepp puts it this way:<\/p>\n\n\n\n

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\u201c<\/em>The average U.S. homeowner now has more than $274,000 in equity \u2013 up significantly from $182,000 before the pandemic. <\/em><\/strong>Also, while homeowners in some areas of the country who bought a property last spring have no equity as a result of price losses, <\/em>forecasted home price appreciation over the next year should help many borrowers regain some of that lost equity<\/em><\/strong>.\u201d<\/em><\/p>\n<\/blockquote>\n\n\n\n

And even though Odeta Kushi, Deputy Chief Economist at First American<\/em>, references a slightly different number, Kushi further validates<\/a> the fact that homeowners have a lot of equity right now: <\/p>\n\n\n\n

\n

\u201cHomeowners today have an average of $302,000 in equity in their homes.\u201d<\/em><\/p>\n<\/blockquote>\n\n\n\n

That means if you\u2019ve owned your home for a few years, you likely still have way more equity<\/a> than you did before the \u2018unicorn\u2019 years. And if you\u2019ve owned your home for a year or less, the forecast for more typical price appreciation over the next year should mean your equity is already on the way back up.<\/p>\n\n\n\n

Bottom Line<\/h3>\n\n\n\n

Context is everything when looking at headlines. While homeowner equity dropped some from last year, it\u2019s still near all-time highs<\/a>. Contact Johnson Team Real Estate so you can get the answers you deserve from an expert who\u2019s here to help as you plan your move<\/a> this year. You can reach us by calling 360.303.2734!<\/p>\n","protected":false},"excerpt":{"rendered":"

You may see media coverage talking about a drop in homeowner equity. What\u2019s important to understand is that equity is tied closely to home values. So, when home prices appreciate, you can expect equity to grow. And when home prices decline, equity does too. Here\u2019s how this has played out recently.  Home prices rose rapidly […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[1],"tags":[],"class_list":{"0":"post-976","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-uncategorized","7":"entry"},"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"fawn","author_link":"https:\/\/johnsonteamrealestate.com\/index.php\/author\/fawn\/"},"_links":{"self":[{"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/posts\/976","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/comments?post=976"}],"version-history":[{"count":1,"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/posts\/976\/revisions"}],"predecessor-version":[{"id":977,"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/posts\/976\/revisions\/977"}],"wp:attachment":[{"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/media?parent=976"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/categories?post=976"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/johnsonteamrealestate.com\/index.php\/wp-json\/wp\/v2\/tags?post=976"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}