By Brent Nyitray,| Market Realist
Corelogic’s Home Equity Report analyzes changes in home equity from a number of different perspectives. Home equity can be used to predict default rates, and we saw a large number of strategic defaults early in the housing bust as professional investors realized they were better off walking away from a property and tossing the keys to the bank. The report also does a deep dive on negative equity, looking at it from a geographic perspective, as well as a loan-to-value (LTV) perspective. It also shows mortgage debt outstanding, and does a state-by-state breakdown.
Changes in home equity has been a major driver of consumer confidence and spending
Lately, the consumer confidence numbers have been increasing, and perhaps the reason is due to jumps in the home price indices, like Case-Schiller. While the biggest home price appreciation has been concentrated in a handful of metropolitan statistical areas (MSAs), prices have increased pretty much everywhere. It appears that even though all real estate is local, the knowledge that prices are increasing nationwide is putting consumers in a better mood.
Home equity drove much of the consumption during the bubble years. Increasing home prices made consumers feel richer, and they monetized that home equity by doing cash-out refinances and using the extracted equity for consumption. At times, it almost appeared that home owners were using their homes as ATMs.
