Homeowners lost $1.5T in equity since May: research

American homeowners lost more than $1 trillion in equity gained during the pandemic since May, according to a new report. 

The report from the mortgage software and analytics company Black Knight shows mortgage holders collectively lost $1.3 trillion in the second quarter of 2022 and $1.5 trillion since May.  

“In the span of just three months, U.S. mortgage holders saw a total of $1.3T in newly acquired equity evaporate,” Black Knight Data & Analytics President Ben Graboske said in statement.

“That is — by far — the largest quarterly decline on record by dollar value and the largest since 2009 on a percentage basis,” Graboske added. 

During the pandemic, the housing market boomed and home prices skyrocketed.

The average mortgage holder has lost about $30,000 since the May peak, but Black Knight’s analysis showed the average mortgage holder has more than $92,000 more equity than before the pandemic. 

Further, the number of homes underwater — meaning, the house is worth less than the amount owed on the loan to purchase the home — rose by 275,000 in the past four months.

Currently, 500,000 are underwater nationwide. 

“The vast majority of homes at risk of falling underwater are those that were purchased in 2022 and late 2021, at or near pandemic-era peak prices. While these loans clearly deserve careful, ongoing monitoring, to put that into context, just 3.6% of nearly 53M U.S. mortgage holders are either underwater or have less than 10% equity in their homes — roughly half the share coming into the pandemic. 

The Federal Reserve’s fight with inflation, which led to a series of jumbo interest rate hikes, has substantially cooled the housing market after a more than two-year boom. 

Home price growth slowed to record levels in September, falling by 2.6 percent from the previous month. Yet Black Knight’s data shows that prices across the country are still high.

Black Knight’s analysis revealed that home values in the nation’s 50 largest markets remain elevated by anywhere from 19 percent to 66 percent since the start of the pandemic.