Why We Are NOT in a Housing Equity Crisis

Why We Are NOT in a Housing Equity Crisis

“Housing slowdown leads to first annual drop in homeowner equity since 2012”


“Home equity is dropping. Here’s what to do now.”


These are just a few of the headlines that hit the news this week following the release of CoreLogic’s Homeowner Equity Report for the first quarter of 2023. The report shows that U.S. homeowners with mortgages have seen their home equity decrease by 0.7% compared to last year.

While it is true that homeowner equity is down compared to last year (which was expected, considering the home price declines we saw at the end of the year), the stories being shared neglect to paint the full picture and put these numbers in context.


Homeowners Still Have Record Amounts of Equity

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Home prices rose rapidly during the ‘unicorn’ years of 2021 and 2022, and homeowners saw a massive boost in equity as a result. But even though that equity was impacted when prices fell slightly at the tail end of 2022, the data shows homeowners still have near record amounts of equity – amounts that are still much higher than before those unicorn years.


The graph below from Keeping Current Matters, created with data from Black Knight’s February 2023 Mortgage Monitor Report, helps illustrate this point by looking at the total amount of ‘tappable’ equity in the U.S. 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 you can see, the pink bars show there was a significant equity boost during 2021 and 2022 as home prices rapidly appreciated. But even though tappable equity has taken a slight dip as the market has corrected, it is still MUCH higher than at any time before the 2020 market boom.

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Equity Losses Will Rebound Quickly

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According to CoreLogic’s report, the equity losses reported amount to a mere $5,400 per homeowner. That is hardly a cause for panic, especially since Black Knight’s data shows the average mortgage holder had $178K in tappable equity at the end of February 2022.


And those losses are already starting to be recovered. Recent home price reports show the worst home price declines are behind us, and prices have started to go up again. Here are the 2023 monthly appreciation numbers we’ve gotten so far:

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These numbers make it clear that the housing market reached its trough at the beginning of 2023 and is on the rebound.


The Bottom Line

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Average home equity has decreased slightly as the housing market has corrected. This was to be expected in the fallout from the housing market correction at the end of 2023, but it should not be a cause for panic. We have already started to see the market rebound as low inventory has kept home prices steady, and we are confident that this small equity decrease is the worst we will see.


While your home equity may have taken a very small dip recently, the only reason it would be a case for concern is if you are trying to sell a property you bought within the last 1-2 years. If you have owned your home for longer than that, you likely have plenty of equity that can be used to weather financial hardship, consolidate debt, or even move up to a better home.


If you would like to find out how much equity you have in your home currently, or would like to create an equity transition plan to use your equity to your advantage, fill out the form below to request a meeting with one of our mortgage advisors.

Overcoming Housing Market Fears

By Luminate Marketing Team • 06 May, 2024
The recent headlines broadcasting mortgage rates surpassing the 7% mark have instilled a sense of apprehension among potential homebuyers. In a market perceived as increasingly unaffordable, it's easy to feel discouraged. However, with the right mortgage strategy, you can transform this challenging market into an opportunity.  Historical Perspective on Mortgage Rates While current rates hovering around 7% seem daunting, a historical review reveals a broader context. During the early 1980s, mortgage rates soared to 18% and even in more stable times, rates have frequently fluctuated above 10%. This historical perspective is vital because it demonstrates that while today’s rates are higher than in recent years, they remain within a historical long-term normal rate range.

Why Cash Buyers Dominate the 2024 Real Estate Market

By Luminate Marketing Team • 28 Apr, 2024
The 2024 real estate market is ROUGH. Losing to multiple offers, emotional frustration, and the stress from competing offers is discouraging to say the least. Notably 32% of home sales are being clinched by all-cash buyers, the strategic advantage of wielding cash has never been clearer. This resurgence in all-cash transactions underscores a market where immediacy and certainty reign supreme, especially as home prices continue their upward trajectory against a backdrop of scarce inventory. Within this context, it’s prudent to evaluate every option that can help you sell an existing home and get your offer accepted on a new home. Navigating the Alternatives iBuyers : These entities provide a quick, straightforward selling process for homeowners looking to bypass the traditional market. By making instant cash offers, iBuyers appeal to those seeking immediacy and convenience. However, this often comes at a cost, including service fees and potentially lower offer prices, as the iBuyer model is designed for speed over maximizing seller profits. Power Buyers : Power buyer programs cater to homeowners wishing to purchase their next home before selling their current one. They typically employ financial tools like bridge loans to facilitate this process, offering a solution to the timing mismatch between buying and selling. While this approach adds flexibility, it can also introduce complexity and additional costs into the transaction. But it's important to remember that not all of the innovative iBuyer and Power Buyer programs are the same. It's all about finding the right fit for your situation. Luminate's Unique Approach At Luminate Home Loans, we've carved out our own niche in the market. We offer a program that turns our clients into cash buyers. This isn't just a minor perk; it's a game-changer. Being a cash buyer makes your offer far more appealing to sellers, cutting through the delays that often come with loan approvals. Our approach is designed with you, the homeowner, in mind. We give you the immediate advantage of a cash offer, coupled with the flexibility to choose the best financing option for you down the line. It's about giving you control and confidence in your home-buying journey. If you're navigating the complexities of buying and selling homes, our program might just be the solution you've been searching for. We focus on ensuring our processes are straightforward, your personal information is secure, and the transition to your new home is as smooth as possible. With Luminate, you're not just moving houses. You're stepping into a well-thought-out system designed to get you into your dream home with ease and certainty. If this sounds like what you need, we're here to make it happen.

Understanding Economic Shifts: How Rising Fast Food Prices Intersect with the Housing Market

By Luminate Marketing Team • 21 Apr, 2024
Have you been noticing the prices of fast food and other products going up? Well, you're not alone. Across the country, families are feeling the financial pain of previously low-priced items suddenly costing double (or triple!) what they’re used to. For example, a lunch for two in California at a fast food chain can easily be $40 nowadays, which is a big jump for places that tout “cheap fast food.” But why exactly is this happening, and what does it have to do with you buying a home? Keep reading for more insights. Why Are Prices Going Up? Starting in April of 2024, the minimum wage for fast-food and healthcare facility employees in California was increased. As a result, their wages went from $16/hour to $20/hour in order to provide better wages and living conditions for these workers. This rise in minimum wage, while much needed for the economy, is happening all across the nation. And when businesses have to pay their employees more, they often raise their prices to cover the costs. Which, unfortunately, means the burger and fries you love might cost more now. What Does This Have to Do with Housing? In recent news, you may have heard of President Biden’s housing plan to help first-time homebuyers and to reduce housing costs. This plan would give money to first-time homebuyers and some families looking to sell their homes. But just like with the fast-food industry, the effects can vary. In some places like California, where not enough houses are available, making homes more affordable might not be enough. In other places, it might help a bit more. So, What's the Best Move for Homebuyers? If you're thinking about buying a home in the near future, it's good to know about these changes and plans. By staying informed and working with an expert lender, you can take advantage of any changes as soon as they happen. But even though extra money in the economy sounds great, it's important to look at the whole picture, like how many houses are available and how much they cost. If more homes become available and the costs of borrowing money for a home go down, this could be a better outcome for buyers vs money that is thrown into the economy. Conclusion Understanding these changes can help you make better, informed choices about your financial future. Whether you're saving up for a big purchase or just deciding where to grab lunch, let us help you save money where it counts! Reach out to us today so we can help you navigate your home-buying journey without having to skip out on the fries.
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