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Many homeowners have equity, but gains smaller than other states

Many homeowners have equity, but gains smaller than other states

By Ron Trujillo/

California homeowners enjoyed the third-largest equity increase in the nation during the fourth quarter, allowing more families to become equity rich or escape from underwater mortgages.

The average homeowner in the state gained $26,000 in equity during the final three months of 2016, behind only West Coast neighbors Washington ($31,000) and Oregon ($27,000).

California homes appreciated an average of 5.8% in the fourth quarter compared to a year ago, according to CoreLogic. It was a middle-of-the-road performance among percentage increases nationwide, with Oregon leading the way at 10.3%, followed by Washington at 10.2%.

Fast-rising home prices continue to help homeowners – and hurt home shoppers, especially first-time buyers.

CoreLogic estimates 95.4% of California homeowners with mortgages have equity, with only 4.6% of mortgages underwater – where consumers owe more than the current value of their home.

Virtually every homeowner in San Francisco has equity in their property at 99.4%, the highest percentage in the nation. Los Angeles has the fifth-highest equity rate at 95.3%.

Those two cities also boast the nation’s lowest loan-to-value ratios in the nation, 37% in San Francisco and 46% in Los Angeles.

Many homeowners in Central California, from Bakersfield to Stockton, and Northern California continue to struggle, with much-slower appreciation.

Feature photo by Konstantin L/Shutterstock

Buy now with small down payment or save more?

It’s a frequent question for consumers – should you buy a home now with the minimum down payment or save more money?

Well, mortgage insurer MGIC has developed an online calculator to help home shoppers see if they should buy now or wait. The calculator takes a number of criteria into consideration, including annual home appreciation, how much money would-be homebuyers can save per month and the cost of rent.

“As mortgage professionals, we must help counter this misinformed idea. Let consumers know – especially those looking to buy their first home – that waiting to save up 20% is not the only option, and they may be better off buying a home today with a smaller down payment rather than waiting,” MGIC states in its blog on the new calculator.

As you can probably guess, consumers will learn they should buy with a minimum down payment rather than save more money – and (ahem) maybe even eliminate the cost of mortgage insurance.

MGIC cautions consumers against buying a home before they are ready. However, here is something else to consider: With a small down payment homeowners could find themselves underwater with even a minor decline in home prices, a real and serious issue during the housing crisis several years ago.

Photo by Rrraum/Shutterstock

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