California Homeowners Enjoying High Levels of Equity and Low Underwater Mortgages

California has the lowest level of “underwater” homeowners in the nation, according to a recent report by CoreLogic. Only 0.6% of mortgages in the state were larger than the value of the home backing the loan in the second quarter, compared to a national average of 1.8%. This is good news for California homeowners, as borrowers in these situations are more likely to default on a loan in tough financial times.

One of the factors contributing to the low number of underwater mortgages in California is the state’s growth in home equity. In the past year, the amount of home value above the typical mortgage’s outstanding balance grew by $117,000, second only to Hawaii’s $129,800. This increase in equity not only creates a buffer for borrowers against financial hardships but also provides homeowners with financial flexibility to borrow against their equity for large purchases or to pay off high-interest debt.

Overall, U.S. homeowners with a mortgage gained $3.6 trillion in equity, representing about 63% of all homes. Average homeowner equity jumped 25% from the second quarter of last year and rose 6.6% from the first three months of this year. However, the pace of home price growth has slowed as the housing market has cooled amid higher mortgage rates.

Despite the slowdown in price growth, CoreLogic forecasts that home prices will continue to increase by 5% over the next year. This is good news for homeowners looking to build equity in their homes and secure their financial future.

With rising homeowner equity and a relatively low number of underwater mortgages, California homeowners can rest assured that their investments are secure in one of the nation’s most expensive housing markets.