A third-quarter report from ATTOM unveiled mixed signals in the American housing market. While almost half of the mortgaged homes were equity-rich, the recent trend showed a decline, the largest quarterly drop since 2019.
“By all measures, homeowner equity around the country remained strong during the third quarter as millions of households kept benefitting from the nation’s extended runup in home values. At the same, though, we saw an unusual downturn at the equity-rich end of the spectrum,” said Rob Barber, CEO for ATTOM. “That could have just been a temporary blip. It also could have reflected an increase in long-time owners who had lots of equity built up selling their homes or perhaps borrowing against their rising wealth and slipping out of equity-rich territory. The fourth quarter data should say more about whether residential equity in the U.S. has indeed topped out.”
These fluctuating patterns in equity occurred amidst the recovery of the U.S. housing market. Following an 8% dip from mid-2022 to early 2023, the median single-family home price surged by 11% in recent quarters. Factors contributing to this rebound include a robust job market, with unemployment under 4%, reduced consumer-price inflation, and a vibrant investment market.
On a state level, nearly 30 states, mainly in the South, saw a reduction in equity-rich mortgages from Q2 to Q3 2023. South Carolina and Florida witnessed significant declines, with percentages dropping to 43.7% and 54.4%, respectively.
Conversely, equity-rich levels increased in 21 states, predominantly in the Northeast. South Dakota, Maine, and Connecticut led the rise.
On the brighter side, homes seriously underwater (loans at least 25% more than the property's market value) continued to improve. Just one in 40 homes were in this category, a noticeable drop from previous quarters. Indiana and Hawaii recorded significant improvements.
States such as Wyoming and Mississippi, however, saw an uptick in seriously underwater homes.
Vermont boasted the highest levels of equity-rich properties, with a staggering 79.8%. The states with the lowest such properties were largely in the Midwest and South, with Louisiana at a mere 19.7%.
Metro areas, particularly in the West and South, like San Jose, Calif., and Sarasota-Bradenton, Fla., led with the highest equity-rich properties. Meanwhile, Baton Rouge, Louisiana, and New Orleans recorded the lowest.
Among the 1,732 counties analyzed, Vermont’s Chittenden and Addison counties topped the equity-rich list, while Wyoming’s Campbell County had the lowest share.
The report also highlighted that at least half of all mortgaged properties in approximately 40% of U.S. zip codes were considered equity-rich. California zip codes dominated this list.
In contrast, seriously underwater mortgages were most prevalent in the Midwest and South regions, with Louisiana recording the highest percentage. Vermont had the smallest share.
Only around 258,900 homeowners faced potential foreclosure in Q3 2023. Remarkably, 92% of these had some equity in their homes. Barber emphasized the significance of this, stating that equity provides resources to delinquent owners, helping them refinance or sell, thus countering property abandonment.
