Fragile housing market: The average Idaho homeowner will see their equity drop by $21,000, while the typical Florida homeowner will see $49,000 in 2022

Just after mortgage rates hit 6%, George Reedy put his home in South Carolina on the market in July 2022. He had to sell for personal reasons. He was also worried that when he listed after mortgage rates rose, he would miss out on the frothy prices created just months earlier at the height of the pandemic housing boom.

“At first I thought we were in trouble, I thought we’d sell for $350,000… But we were on the market less than a week and we had an offer,” Reedy says. Luck.

Reedy ended up fetching his list price of $465,000 for his two-story Craftsman-style home in Taylors, SC. That’s 95% more than the $238,500 he paid for the four-bedroom home in 2015.

While the ongoing housing downturn is seeing domestic home prices fall slightly from the peaks experienced during the pandemic housing boom, most homeowners are still on the upswing. In fact, 42 of the 46 states tracked by CoreLogic saw average home equity levels increase from the last quarter of 2021 to the last quarter of 2022. Only California, Idaho, Utah and Washington saw average stock levels decrease between that year. for more than a year.

“As US home price growth continued its slow, steady decline in the final months of 2022, housing stock trends naturally followed suit. In the fourth quarter of 2022, the average borrower earned about $14,300 in equity over the same period last year, compared to a gain of $63,100 in the first quarter of 2022,” CoreLogic Chief Economist Selma Hepp wrote in a statement. Luck.

The average homeowner in Florida saw the biggest gain, with the average equity amount increasing by $49,032 from the last quarter of 2021 to the last quarter of 2022. Meanwhile, the average homeowner in Idaho saw the biggest drop, with the average equity falling $21,352 over that period.

In two-thirds of the regional housing markets tracked by Zillow during February, local home prices have declined from their 2022 peaks. However, in only 39 of the country’s 400 largest market areas, local home prices have fallen by more than 5% on a seasonally adjusted basis. Almost all of those hard-hit markets are outside the West. (Here is apartment price information from the country’s 400 largest housing markets).

“While equity gains narrowed in late 2022 due to lower home prices in some areas, U.S. homeowners still have an average of about $270,000 more in equity than when the pandemic began,” writes Hepp. “Even in Idaho, where borrowers were most vulnerable to losses, the typical homeowner with a mortgage still has about $250,000 in home equity remaining.”

See the average change in home equity per homeowner between the fourth quarter of 2021 and the last quarter of 2022

Let’s be clear: these year-over-year increases in equity do not mean that the U.S. housing market has returned to a bullish cycle.

In fact, nearly all of these stock gains occurred in the first few months of 2022 (see chart below), when the pandemic housing boom — which boosted national home prices by 41% between March 2020 and June 2022 — was in its final innings.

The seasonally adjusted Case-Shiller National Home Price Index reported 124 consecutive months of positive home price gains from the previous correction in February 2012 to the peak of the pandemic housing boom in June 2022. But with the onset of the ongoing housing downturn, that streak ended in the second half of 2022. In fact, US home prices fell every month in the second half of 2022, ending the year 2.7% below the June peak.

National housing prices have risen by a further 5.8 percent from the previous year. However, it is likely that national home prices as measured by Case-Shiller will be negative on an annualized basis sometime in the coming months as the high appreciation months of early 2022 fall out of the 12-month window. When this happens, Hepp says, people shouldn’t overreact.

“Some urban areas that became increasingly popular during the COVID-19 pandemic saw price increases and affordability decline, but those areas are now undergoing major corrections. And while price declines will likely continue through the spring of 2023, when the market will likely see some year-over-year declines, the recent decline in mortgage rates has increased buyer demand and may lead to a more optimistic home buying season than many expected,” writes Hepp.

On a national level, CoreLogic expects US home prices to be negative on an annualized basis around April. After that, CoreLogic expects national home prices to rise and return to around the June 2022 peak in late 2023. (Here’s a summary of other national house price forecasts).

Do you want to keep up to date with the housing market? Follow me on Twitter at @NewsLambert.

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