It looks like the fourth quarter was a very financially favorable one for homeowners, as a new report shows that the average homeowner just gained a substantial amount of equity in their home.
According to a new report from CoreLogic, homeowners with a mortgage saw their equity increase by a total of $1.5 trillion from the fourth quarter of 2019 to the fourth quarter of 2020. That equates to an average gain in home equity of $26,300 per homeowner in the last year.
Those figures represent a significant increase over the totals from the third quarter, which showed that homeowners with a mortgage gained $1 trillion (or $17,000 per homeowner) from the third quarter of 2019 to the third quarter of 2020.
So, in the fourth quarter alone, homeowners gained a total of $500 billion in equity (or just shy of $10,000 per homeowner).
According to CoreLogic, the average annual equity gains in the fourth quarter with the highest in any quarter since 2013.
As a result of those gains, the average homeowner now has more than $200,000 in equity in their home, according to CoreLogic Chief Economist Frank Nothaft.
The main cause of the equity increase is rising home prices, which climbed by more than 10% in the fourth quarter, according to the Federal Housing Finance Agency.
“For current owners, these gains have created a buffer against financial difficulties brought on by the pandemic, and enabled means for pursuing renovations as people are spending more time at home,” CoreLogic said in its report. “For the broader market, home equity gains have also reduced the risk of homes falling underwater and pushing distressed sales into the market.”
According to Nothaft, the growth in equity “enabled many families to finance home remodeling, such as adding an office or study, further contributing to last year’s record level in home improvement spending.”