California Homeowners Benefit from Rising 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 California’s mortgages in the second quarter were larger than the value of the home backing the loan, compared to the national average of 1.8%.

This positive trend can be attributed to California’s growth in home equity over the past year. The amount of home value above the typical California mortgage’s outstanding balance increased by $117,000, second only to Hawaii’s $129,800. This rise in equity not only provides a buffer for borrowers against financial hardships but also allows homeowners 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 saw a 25% increase from the second quarter of last year and a 6.6% rise from the first three months of this year. However, the pace of home price growth has moderated as the housing market has cooled amid higher mortgage rates.

Despite the slowdown in price growth, CoreLogic forecasts a 5% increase in home prices over the next year. This is expected to impact home equity gains, as noted by economist Molly Boesel.

With rising homeowner equity and a more stable housing market, California homeowners can feel more secure in their investments and financial stability.