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Hold or sold, homeowners in California enjoy record equity, profits

Fast-rising home values are helping owners cash in, whether they are selling their home or just want to tap some equity.

More than half of homeowners in California with a mortgage are considered ‘equity rich’

California homeowners enjoyed hefty gains during the final three months of the year, whether they held or sold their property, according to two recent reports.

Almost 54% of California homeowners with a mortgage are considered equity rich – where debt is less than half of the estimated value of their home, according to ATTOM Data Solutions. It’s one of the highest percentages in the nation, behind first-place Idaho at 67% followed by Vermont and Utah. 

Annual double-digit gains, thanks to the booming demand and limited supply of homes on the market, have greatly increased homeowner equity in recent years, especially during the ongoing Covid pandemic.

Feeling rich, from the Bay Area to the border

Two of every three homeowners (66%) in San Jose are considered equity rich, the highest percentage in the state. San Francisco-Oakland followed at 62% with Los Angeles in third place at 57.4% (see chart below).

The state’s inland areas, such as the Inland Empire and the Sacramento region, have lower but still solid equity rates that are better than the national average. Bakersfield has the lowest equity rate at 36% among the major metro areas in California.

“As home prices kept rising, so did the equity build-up in residential properties. No doubt, there are market metrics that pose warnings about how long the boom can last and equity can keep improving. But, for now, homeowners are sitting pretty as the wealth they have tucked away in their homes keeps growing.”

Todd Teta, chief product officer for ATTOM Data Solutions in Irvine
Half of homeowners are equity rich thanks to soaring prices
RegionPercentage of homeowners considered equity rich
San Jose-Sunnyvale66%
San Francisco-Oakland62%
Los Angeles57.4%
San Diego55.6%
California53.7%
Ventura County50.9%
Riverside-San Bernardino47.5%
Fresno42%
Bakersfield36%
Source: ATTOM Data Solutions

Trillions and trillions of tappable equity

Industry tracker Black Knight estimates American homeowners with a mortgage can tap a record $9.9 trillion in equity, a 35% increase compared to a year ago. The average homeowner nationwide can tap about $185,000 in equity. Under most circumstances, mortgage lenders require homeowners to keep at least 20% of their equity. 

For California homeowners who sold their homes, the payday was rich. The average California homeowner sold their home for $640,000 in the fourth quarter, an 18.4% increase compared to a year ago – and up 52% since 2016, according to ATTOM Data. It was the second-highest average sales price in the nation, behind Washington, D.C., at $651,000.

San Jose home sellers enjoyed the largest profit at $575,000, but also one of the smallest percentage increases compared to a year ago at 5.7%. San Francisco finished in second place at $462,000, up 21.6% from a year ago.

Homesellers in Santa Barbara County, from Santa Maria to the South Coast, had the largest percentage increase in the state at 41%, followed by the Sacramento region – one of the hottest markets in the nation – at 36% (see chart for more details).

Cheers – and maybe a few fears

The West had 16 of the top 20 metros with the largest percentage increases, with Boise, Idaho, leading the way at 122%, followed by Bremerton, Wash., at a distant second-place at 87%.

Nationwide, the average homeowner had a record profit of $94,100, a 25% increase from a year ago.

But the celebration cheers also come with some warnings, Teta says. 

Affordability, already near a record low, and fast-rising mortgage rates – at the highest point since October 2019 – could challenge the housing market.

“Households that escaped job losses from the pandemic dove into the market, in large part as a response to the crisis,” Teta says. “And the rising demand led the market boom onward. No doubt, there are warning signs that the surge could slow down this year. But 2021 will go down as one of the greatest years for sellers and one of the toughest for buyers.”

Average profit by home-sellers in fourth quarter vs. a year ago
RegionAverage profitPercentage increase from a year ago
San Jose$575,0006.5%
San Francisco$462,00021.6%
Santa Barbara County$281,50040.8%
Los Angeles$267,5005.7%
San Diego$262,00024.8%
Ventura County$230,00015.0%
Sacramento$200,00036.1%
Riverside-San Bernardino$180,00033.3%
Fresno$113,00016.5%
Bakersfield$98,37515.7%
Source: ATTOM Data Solutions

Feature photo of homes in Mission Viejo by BonandBon/Adobe Stock