Key facts
- Home equity reached a record $18 trillion in the second quarter.
- Annual home price growth accelerated to 1.5% in July, the strongest single-month increase in over three years.
- 813,000 mortgage holders were underwater, a 44% increase year-over-year.
- The share of mortgages in active foreclosure reached 0.53%, a six-year high.
- Mortgage rates ended July near 6.7%, influenced by rising 10-year Treasury yields.
Home equity in the United States reached a record $18 trillion in the second quarter, fueled by an acceleration in annual home price growth to its highest level in 14 months in July. This surge in homeowner wealth occurred even as mortgage delinquencies and foreclosure activity continued to rise, according to Intercontinental Exchange's (ICE) August Mortgage Monitor report.
Annual home price growth increased to 1.5% in July, marking the fifth consecutive month of acceleration. ICE attributed this boost to lower mortgage rates earlier in the year, though rates have since climbed, potentially limiting further gains in the latter half of the year. Andy Walden, head of mortgage and housing market research at ICE, described the $18 trillion equity milestone as remarkable, reflecting significant wealth built by American homeowners.
Despite the overall equity growth, mortgage holders had $11.7 trillion in tappable equity, with approximately 47.5 million borrowers each holding an average of $212,000. Total mortgage debt surpassed $15 trillion for the first time, though it remains low relative to home values. However, the number of homeowners underwater on their mortgages increased by 44% year-over-year to 813,000. About 320,000 borrowers were both underwater and behind on payments, nearly doubling from the previous year, with Texas and Florida accounting for a significant portion of these distressed properties.
Mortgage delinquencies saw a modest rise in June, with the national rate increasing to 3.55%. The share of mortgages in active foreclosure reached 0.53%, the highest in six years, with foreclosure starts also hitting a six-year high. Loans originated in 2022 or later constitute nearly 35% of active foreclosure inventory, indicating challenges for recent buyers in a higher-rate environment with limited price appreciation. New defaults have not broadly accelerated, with FHA loan defaults falling, though VA loan defaults increased.
Mortgage rates ended July near 6.7%, their highest level in a year, driven by a rise in 10-year Treasury yields. The report also highlighted significant rate variations among lenders for borrowers with similar credit profiles, leading to notable differences in monthly payments.