The average Massachusetts homeowner gained $31,000 in equity in the third quarter on a year-over-year basis, CoreLogic reported, nearly double the national average.

With low interest rates and the COVID-19 pandemic triggering one of the largest homebuying surges in recent memory and a long-running undersupply of new homes, Massachusetts homeowners’ gain was among the biggest gains of any state.

The equity gains should offer protection against a foreclosure crisis similar to the Great Recession’s, Frank Nothaft, chief economist for CoreLogic, said in a statement.

“The average family with a home mortgage loan had $194,000 in home equity in the third quarter. This provides an important buffer to protect families if they experience financial difficulties, and is one reason for the generational-low in foreclosure rates reported in September,” Nothaft said.

Nationally, the average homeowner gained $13,000 in equity year-over-year in the third quarter, CoreLogic said, with the bulk of the gains concentrated among homeowners whose loan-to-value ratios were between 50 percent and 79 percent, suggesting those in their early years of homebuying will not feel the benefits of the growth. Twenty-three percent of America’s unemployed, seasonally adjusted, are between the ages of 25 and 44, according to the Bureau of Labor Statistics.

CoreLogic graphic

Only 2.5 percent of Boston-area homeowners currently have negative equity, putting the metro in a stable position should the continued COVID-19 pandemic trigger even more economic pain.

New research from Redfin supports CoreLogic’s contention. The average loan-to-value ratio in Boston is 52.6 percent and despite a 9.2 percent unemployment rate and, according to Census Bureau figures, 42.5 percent of households reporting some form of income loss due to COVID and 8.9 percent of homeowners not current on their mortgage payments, only 2.1 percent of homeowners report that they are very or somewhat likely to foreclose on their homes in the next two months.

“American homeowners have gained $2 trillion dollars in home equity since the beginning of the pandemic alone, thanks to double-digit price growth driven by soaring homebuyer demand as the supply of homes for sale fell to historic lows,” Redfin chief economist Daryl Fairweather said in a statement. “And an impending wave of foreclosed homes will only make a small dent in the inventory drought. First-time homebuyers and investors will likely quickly buy up any foreclosed homes, leaving the larger housing market unimpacted. While this is good news for the housing market and economy, it highlights a growing inequality between Americans who have suffered deeply during the pandemic recession and Americans who have been largely unaffected or have even become wealthier.”

The impact of a foreclosure crisis on the scale of the Great Recession could have a devastating impact on racial equity. New research from the Mortgage Bankers Association released this week attributes much of the growth in economic inequality in the last 10 years to the decline in homeownership among middle-class households nation-wide.

“The typical household by 2016 was wealthier than it was in 2013, but significantly poorer in comparison to its situation in 2007. These findings offer solid evidence as to why over half of Americans have consistently expressed in countless surveys that the country is not moving in the right direction,” report author John C. Weicher, director for the Center for Housing and Financial Markets at the Hudson Institute, said in a statement. “Middle-class households did not fully recover from the financial crisis, and the poor saw their net worth turn negative and stay negative. Meanwhile, the rich recovered faster and their share of wealth increased from 71 percent in 2007 to 77 percent in 2016. The result is a less-equal America, and many families that fell behind have reasons to worry as they cope with the pandemic and move closer to retirement.”

The Great Recession affected the rich as well as the poor, Weicher found, but the rich were less affected. The total net worth of the rich declined by 11 percent, from $53.5 trillion in 2007 to $47.9 trillion in 2010. The net worth of the middle class declined by 20 percent and the debts of the poor increased by 60%, leaving them with negative net worth as a group.

Homeowners Gained Record Amount of Equity in Q3

by James Sanna time to read: 3 min
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