Homes purchased in the last 2 years have seen equity increase

Despite decreasing home values and increasing incidence of negative equity scenarios, most U.S. homeowners still have positive equity in their homes. In fact, many homeowners who purchased in the last two years have seen overall equity increase since they made their purchase. The variances and movements in owner equity depend on many factors such as when the home was purchased, how much was put down and net market appreciation.

Americans who bought a home in the last two years placed a median down payment of 10% and now have a median of 13% equity (4) in their investment. This is the equivalent of owning only about 200 square feet — the size of one standard bedroom — in an average 1,500-square-foot, three-bedroom, two-bath home. Most homeowners who bought five years ago have the benefit of time and the market on their side. After placing a median down payment of 11%, these homeowners watched home values grow at an annualized rate of 9.4% over the past five years and now own a median of 41% of their home.

Many homeowners who bought during the last two years when most local markets reached their peak, subsequent declines in value have left them with negative home equity, owing more than the home is currently worth. As of September 30, nearly 16% (15.6%) of homeowners nationwide who bought in the last year (3) and 17.5% of those who purchased two years ago have current home values that are less than the original mortgage amount. By comparison, less than 2% (1.8%) of those who purchased a home five years ago have seen their equity slide into the negative.
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