A study from the National Association of Realtors’ (NAR) Economists’ Outlook blog shows that many homeowners have built up home equity that outweighs recent price declines.
Between Q1 of 2012 and Q3 of 2018, a median-priced home has gained $96,187 in home equity, or 41 percent of the $235,119 estimated value in Q3 of 2018. Metros that have seen even greater equity gains over the same period include San Jose-Sunnyvale-Sta. Clara ($591,576), San Francisco-Oakland-Hayward ($527,610), Urban Honolulu, HI ($337,013), Los Angeles-Long Beach-Glendale ($374,565), and Boulder, CO ($329,608).
Similar areas saw median list prices declines year over year in October 2018, including San Jose-Sunnyvale-Sta. Clara (-0.1 percent), San Francisco-Oakland-Hayward (0 percent), and Sta. Maria-Sta. Barbara (-7.8 percent). The Denver-Aurora-Lakewood saw the greatest decline, at 10 percent, but in all cases remained well under equity gains on average. Other cities with lower median prices continue to see prices rise.
On the one hand, the cooling of home prices in high-priced metro areas makes a home purchase more affordable, saving households nearly $50/month on a median-priced home. On the other hand, falling prices also erodes the wealth (home equity gains) of current homeowners and can drive homeowners in a negative equity position (when the value of the home is lower than the remaining loan balance).