A new report shows the average homeowner in California gained $117,000 in equity last year alone. 

According to CoreLogic, less than one percent of California homeowners are now underwater on their mortgages, the lowest in the nation.

The Homeowner Equity Report for the fourth quarter of 2021 shows U.S. homeowners with mortgages (which account for roughly 64% of all properties) have seen their equity increase by 29.3% year over year — representing a collective equity gain of over $3.2 trillion, an average gain of $55,300 per borrower, since the fourth quarter of 2020.

U.S. home prices rose 18% year over year in the fourth quarter of 2021, up from the 8% annual gain recorded in the fourth quarter in 2020.

The study report reveals that the appreciation helped push the national negative equity figure to the lowest in over a dozen years — with just 1.1 million homeowners underwater on their mortgages.

Courtesy: CoreLogic’s Homeowner Equity Report report for the fourth quarter of 2021.

On the west coast, homeowners in Hawaii, California, and Washington saw the biggest equity gains by dollar value.

In January, the year-over-year price appreciation increased by 19.1% but growth is projected to eventually slow down over the next 12 months.

“Home prices rose 18% during 2021 in the CoreLogic Home Price Index, the largest annual gain recorded in its 45-year history, generating a big increase in home equity wealth,” said Dr. Frank Nothaft, chief economist for CoreLogic.

“For low- and moderate-income homeowners, home equity has historically been a major source of wealth.”

Courtesy: CoreLogic’s Homeowner Equity Report report for the fourth quarter of 2021.

The report shows that in the San Francisco area, less than one percent of homeowners are underwater on their mortgages.

Negative equity, also referred to as underwater or upside-down mortgages, applies to borrowers who owe more on their mortgages than their homes are currently worth. 

As of the fourth quarter of 2021, negative equity share, and the quarter-over-quarter and year-over-year changes, were as follows:

• Quarterly change: From the third quarter of 2021 to the fourth quarter of 2021, the total number of mortgaged homes in negative equity decreased by 3% to 1.1 million homes or 2.1% of all mortgaged properties.

• Annual change: In the fourth quarter of 2020, 1.5 million homes, or 2.8% of all mortgaged properties, were in negative equity. This number decreased by 24.9%, or approximately 380,000 properties, by the fourth quarter of 2021.

• Distribution of negative equity: Of loans in negative equity in the fourth quarter of 2021, 42% had a loan-to-value ratio below 125%, and 58% had a loan-to-value ratio of 125% or higher.

The report also mentioned that upon looking at the fourth quarter of 2021 book of mortgages, if home prices increase by 5%, 141,000 homes would gain equity.

On the contrary, if home prices decline by 5%, 183,000 would fall underwater.

CoreLogic’s HPI Forecast TM projects home prices will increase 5% from December 2021 to December 2022.