Nearly half (46 percent) of all U.S. homeowners with a mortgage expect their equity will increase in 2016, even though three out of five (60 percent) report equity in their homes already has increased during the last three years of the housing recovery, according to new research conducted for loanDepot.
Of those who expect their equity to change this year, 85 percent expect it to rise as much as 10 percent, with a quarter (27 percent) expecting it to rise between 6 percent and 10 percent. More than half (58 percent) are expecting an equity bump between 1 percent and 5 percent.
Industry-wide reports forecast 2016 annual price gains to range between 2.3 percent and 4.7 percent. Only 3 percent of homeowners expect their equity to fall in 2016, and 27 percent expect it to remain the same.
“Homeowners who bought during the housing boom are regaining equity many thought was lost forever, yet too many are not aware of the equity they have gained or they are unclear about how to determine changes in their equity,” Chief Financial Officer Bryan Sullivan said in a news release. “People who bought after the housing boom when prices were low are realizing homeownership can be a great investment and an asset that they can now leverage through equity to realize many dreams. Whether they choose to leverage their home equity now or reserve it for future needs, millions of homeowners have choices today not available just a few years ago.”
More than 100 U.S. housing experts forecast home values will reach an average annual growth rate of 3.65 percent through the end of 2016. Today, more than 49 million homeowners – or 66 percent of all homeowners – hold a mortgage on their home, according to the report.
The loanDepot research also found that although 57 percent of homeowners believe their home’s value has appreciated in the past three years, the majority (80 percent) underestimate the amount of value their home has gained throughout the housing recovery. Of those who believe their home’s value has increased since 2013, one in four (27 percent) believe it increased between 1 percent and 5 percent since 2013. The Case Shiller 20-city index shows prices rose twice that much, in fact 10 percent from Nov 2013 to Nov 2015.
Pre- versus post-boom homeowners
The loanDepot research reveals homeowners who bought before and during the boom – and watched their equity wash away from 2007 to 2009 – have very different views on equity compared with those who bought when prices were lower, post 2009. The research found:
- More buyers who purchased after 2009 (64 percent) believe their home has gained value since 2013, compared with 58 percent of pre-2009 owners.
- More buyers who purchased after 2009 (50 percent) expect to gain more equity this year, compared with 43 percent of pre-2009 buyers. Newer buyers might be more bullish on equity gains because they did not experience drastic losses of equity like their pre-2009 counterparts.
- More pre-2009 owners (65 percent) believe they have adequate equity now to take out a home equity loan, compared with just over half (52 percent) of post-2009 buyers.
- Post-2009 owners are more conservative on using their equity. A majority of owners from both periods say they have always been conservative about accessing their equity, but post-2009 buyers are more so by a margin of 62 percent to 55 percent.