ATTOM released its fourth quarter U.S. Home Equity & Underwater Report, showing that nearly 42% of mortgage residential properties in the United States were considered equity-rich. This means that the combined estimated amount of loan balances secured by those properties was no more than 50% of their estimated market value.
Nearly every other home in America is equity-rich, according to the report’s results for the fourth quarter of 2021. The portion of equity-rich homes was up from 39.5% in the third quarter of 2021 and 30.2% in the fourth quarter of 2020.
The report also showed that 1 out of every 32 mortgaged homes were considered seriously underwater in the fourth quarter of 2021. A combined estimated balance of loans by the property of at least 25% more than the property’s estimated market value. That figure is down 3.4% of all U.S. homes with a mortgage in the prior quarter and 5.4% or 1 in 18 properties a year earlier.
Nationwide, 48 states saw home equity levels increase from the third quarter to the fourth quarter in 2021, while seriously underwater mortgages decreased in 46 states. Year-over-year, equity rich levels rose in 49 states as seriously underwater portions dropped in 48 states.
These gains come after the U.S. housing market concluded one of its best years in the past decade. Since the start of the pandemic, rock-bottom mortgage rates and the desire for a change in landscape caused the market to flood with a wave of new home buyers.
Some warning signs of a weakening foundation under the market have emerged in the second half of 2021: the massive decline in home affordability, rising foreclosures, and falling investor profits. The upward surge in inflation posts additional concerns, but this past year saw the biggest improvement in portions of mortgage payers who were either equity rich or underwater.
"Another quarter, another boost to the balance sheets of homeowners in most of the United States – that was the story from the fourth quarter of last year. As home prices kept rising, so did the equity built up in residential properties, to the point where close to half of all mortgage payers around the country found themselves in equity-rich territory," said Todd Teta, chief product officer with ATTOM. "No doubt, there are market metrics that pose warnings about how long the boom can last and equity can keep improving. We keep watching those closely. But for now, homeowners are sitting pretty as the wealth they have tucked away in their homes keeps growing."
The biggest improvement in equity rich homes are occurring in the western and southern states, which have 13 of the 15 states where equity-rich share of mortgage homes increased the most for the third quarter of 2021 to the fourth quarter of 2021. States that had the biggest increases included Tennessee (up from 41.4% in the third quarter to 47.2% in the fourth quarter); North Carolina (up from 38.6% to 44.2%); Nevada (up from 44.9 percent to 49.8 percent); Georgia (up from 35.3% to 40.1%); and Arizona (up from 53.2% to 57.6%).
