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The residential real estate market has experienced some rough times lately, but homeownership clearly has its benefits: The average owner gained about $20,000 in home equity over the past 12 months.

In the third quarter of 2023, the total equity value of all homes with mortgages increased by $1.1 trillion year-over-year, according to a report by real estate data company CoreLogic. That’s a near 7% increase.

As is often the case in real estate, location can have a big influence on the trajectory of your home’s value. Hawaiian homeowners, for example, saw a blistering $64,000 average rise in home equity over the past year. A total of 17 states saw homeowners’ equities rise by an average of $20,000 or more.

Not all states saw increases in equity value, mind you. Three states saw the average home equity decrease year-over-year: Texas, New York and Utah.

What is home equity and how does it work?

Equity is the value of an asset minus how much debt the owner owes on the asset. Home equity is generally calculated by subtracting the money owed on a mortgage from the total estimated value of the property.

Home equity isn’t just a point of pride for owners; it’s also a valuable tool if you need to borrow down the line through a home equity loan.

The fact that the average owner gained tens of thousands of dollars in additional equity is a signal that owners have largely benefitted from a rise in home values and stayed atop their mortgage payments.

Increases in home equity can occur for a number of reasons. Homeowners who pay down their mortgages increase their home equity by doing so, and those who make larger down payments will instantly have more equity in their home than owners who make smaller ones. Refinancing your mortgage to shorten the term of your loan is another way to increase equity faster.

Market trends have a large effect on equity too, made especially apparent in recent times as home values across the U.S. ballooned. If you buy a house with a mortgage, and the value of your home increases, your equity also increases because you’re only paying a loan on the cost at the time you purchased it.

Prices and values of homes across the real estate have been propped up for the entirety of 2023, caused by high mortgage rates and low inventory. This trend is leading to the spike in equity for many owners. And homeowners may continue to benefit; real estate company Zillow predicted in August that home values would continue to rise by 6.5% by July 2024.

10 states with the biggest rise in home equity

Here are the 10 states with the highest home equity gains over the last year, with the average increase in parenthesis, according to CoreLogic:

Hawaii (+$64,000) California (+$51,000) Massachusetts (+$45,000) Rhode Island (+$43,000) Connecticut (+$42,000) New Hampshire (+$41,000) New Jersey (+$41,000) Maine (+$34,000) Wisconsin (+$30,000) Florida (+$28,000) 10 states with the highest share of negative equity

Another good development for owners over the last year is the decrease in homes with negative equity. An owner with negative equity owes more on their house than that house is worth. In the third quarter, the number of homes with negative equity decreased by 8%, or by about 90,000 properties.

As you may expect, the states with the highest increase in equity have some of the lowest shares of homes with negative equity. Only 1.2% of Hawaiian homes and 0.6% of Californian homes have negative equity. Meanwhile, states in the central U.S. have the highest shares of homeowners who have negative equity or are “underwater,” to use another real estate expression.

Here is a list of the states with the highest share of negative home equity:

Louisiana (6.1%) Iowa (4.9%) Oklahoma (4.1%) North Dakota (3.7%) Kentucky (3.4%) New York (3.3%) Arkansas (3.3%) Nebraska (3.1%) Illinois (3.0%) Wisconsin (2.6%)

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Original: Money.com: Home Equity Increased Most in Hawaii, California: Study