Hot market fuels rise in home equity

LOS ANGELES — The redhot U.S. housing market is paying off for many homeowners, even those who aren’t looking to sell their home.

On average, homes with a mortgage gained $26,300 in equity in the last three months of 2020 versus a year earlier, according to real estate information company CoreLogic. That average gain is the highest since 2013, the firm said.

CoreLogic said homes with a mortgage account for about 62% of all U.S. properties. Taken together, the home equity for those properties surged to more than $1.5 trillion, an increase of 16.2% from a year earlier.

The surge in homeowners’ equity can potentially make a positive impact on borrowers’ finances; for one thing, it creates a buffer against potential financial hardship, such as job loss.

And homeowners could opt to put some of the gains to use, giving a boost to the economy.

Rising home values and low mortgage rates spurred many U.S. homeowners to refinance and cash in some of the equity in their home last year. Homeowners pulled out $152.7 billion in equity, an increase of 41.7% from 2019 and the highest refinancing cashout dollar amount since 2007, according to mortgage buyer Freddie Mac. Homeowners also tapped into the equity in their home via a home equity line of credit, or HELOC. The volume of HELOCs more than doubled in 2020 from a year earlier to $74.9 billion.

Low mortgage rates, strong demand and a record low inventory of homes for sale nationwide have fueled home sales and pushed home prices higher since last summer.