According to the Federal Reserve Economic Data (FRED) report, the homeowners’ equity in real estate for households in the United States topped $32.6 trillion in 2023. This is an increase of 1.3% or $425 billion from Q2 2023 and sets a new record for accumulated equity.
In the third quarter of 2023, homeowners’ equity increased for the second straight quarter after a slight decline that began in the third quarter of 2022. The Federal Reserve estimated that homeowners’ equity (total property value less mortgage debt outstanding) rose 1.3 percent, or $425 billion, from the second quarter of 2023 and now stands at more than $32.6 trillion.
Changes in home prices are the primary driver of gains or losses in equity. For the third quarter of 2023, CoreLogic estimated the number of underwater borrowers (those who owe more on their mortgage than the value of their home) decreased by 86,000 from the second quarter to 1.030 million, or 1.8 percent of residential properties with a mortgage, and were 90,000 fewer than the prior year.
Annual house prices accelerated again in October 2023, with increases ranging from 4.9 to 6.3 percent. The Federal Housing Finance Agency (FHFA) seasonally adjusted (SA) purchase-only house price index for October estimated that home values rose 0.3 percent month-over-month, and 6.3 percent year-over-year, up slightly from an annual gain of 6.2 percent in September.
Financing became more expensive in the first three quarters of 2023 as the Federal Reserve consistently raised interest rates, a process that began in April 2022. House prices peaked in June 2022 and began to decline modestly, as the higher rates put downward pressure on prices. That trend reversed itself in February 2023, as current owners became increasingly reluctant to sell and home prices rebounded. Following the Federal Reserve suspension of interest rate increases at the end of 2023, home prices have further escalated.
Whenever considering a real-estate purchase or sale, we recommend that you first speak with a trusted advisor.