According to a new analysis by Black Knight, homeowners have lost close to $1.5 trillion in equity since May as property prices begin to decline for the first time since the pandemic.
Homeowners are beginning to regret their decision to buy during the COVID-19 pandemic, a period when prices surged 45% rather quickly. Now, those who bought their properties before 2020 have a combined $5 trillion more than before the pandemic hit.
“In the span of just three months, U.S. mortgage holders saw a total of $1.3T in newly acquired equity evaporate,” Black Knight Data & Analytics President Ben Graboske explained. “That is — by far — the largest quarterly decline on record by dollar value and the largest since 2009 on a percentage basis.
While borrowers have lost close to $30,000 in equity since May, the monthly payment on the average home — with a 20% down payment on a mortgage — is up almost $1,000 since the start of the year.
The effects are most pronounced in 10% of the largest markets, including Las Vegas, Miami, Los Angeles, Phoenix, and San Diego. In those locations, homeowners must spend twice the average median household income to make monthly payments.
Further, house prices are down 2.6% since the end of June, the first three-month drop since 2018. That’s led to a frenzy causing 80% of buyers to compromise on their priorities — even seeing the property in person.
“While additional declines may be on the horizon, homeowner positions remain broadly strong,” Graboske assured. Still, the situation “ demands careful, ongoing monitoring.”
“Just 3.6% of nearly 53 million U.S. mortgage holders are either underwater or have less than 10% equity in their homes, roughly half the share coming into the pandemic,” he added.
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