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The bad news is that in a historically tight housing market the cost of buying a home is still going up. The good news is that if you already own one the equity is also going up.
According to ATTOM, 44.9% of mortgaged residential properties in the United States were considered equity-rich in the first quarter of 2022, meaning that the combined estimated amount of loan balances secured by those properties was no more than 50% of their homes' estimated market values.
The company, which curates real estate data nationwide for land and property data, released its first-quarter 2022 U.S. Home Equity & Underwater Report Thursday.
According to the report, The portion of mortgaged homes that were equity-rich in the first quarter of 2022 inched close to half, up from 41.9% in the fourth quarter of 2021 and from 31.9% in the first quarter of 2021.
“Equity rich,” according to the report, is a loan to value ratio of 50% or lower, meaning the property owner had at least 50% equity.
"Homeowners continue to benefit from rising home prices," Rick Sharga, executive vice president of market intelligence for ATTOM, said. "Record levels of home equity provide financial security for millions of families, and minimize the chance of another housing market crash like the one we saw in 2008. But these higher home prices and rising interest rates make it extremely challenging for first time buyers to enter the market."
The report also shows that just 3.2% of mortgaged homes, or one in 31 were considered seriously underwater in the first quarter of 2022, with a combined estimated balance of loans secured by the property of at least 25% more than the property's estimated market value. That was virtually the same as the 3.1% level of all U.S. homes with a mortgage in the prior quarter, but still well down from 4.7%, or one in 21 properties, a year earlier.
“Seriously underwater,” according to the report, is a loan to value ratio of 125% or above, meaning the property owner owed at least 25% more than the estimated market value of the property.
According to the report, 45 states saw equity-rich levels increase from the fourth quarter of 2021 to the first quarter of 2022, while seriously underwater percentages increased in 28 states, albeit by less than 1% in most cases. Year-over-year, equity-rich levels rose in 48 states and seriously underwater portions dropped in 46 states, the report said..
These latest equity trends come as the decade-long U.S. housing market boom continued from late 2021 into early 2022, although at a slower pace. Nationwide, the median home price rose 2% during that time, to yet another record of $320,500. That left it 17% ahead year over year nationally and up by at least 10% in most of the country.
According to the report, while market analysts generally are predicting a slowdown this year, the most recent gains happened as a glut of home buyers kept chasing the tight supply of properties for sale, which kicked prices up even higher. The market remains strong amid an ongoing combination of rock-bottom mortgage rates and a desire of many households to trade life in congested virus-prone locales for the wider spaces afforded by a house and yard.
Homeowner equity improved again in the first quarter as rising home prices widened gaps between what homeowners owed on their mortgages and the value of their properties.
"It's likely that equity will continue to grow through the rest of 2022, although home price increases should moderate as the year goes on," Sharga said. "Rising interest rates, the highest inflation in 40 years, and the ongoing supply chain disruptions due to the war in Ukraine are likely to weaken demand and slow down home price appreciation."
Other highlights from the report included:
The 15 states where the equity-rich share of mortgaged homes rose most from the fourth quarter of 2021 to the first quarter of 2022 were all in the western and southern regions of the U.S. States, with the biggest increases in New Mexico, where the portion of mortgaged homes considered equity-rich rose from 35.3% in the fourth quarter to 43.4% in the first quarter of 2022; Florida (up from 46.6% to 53.6%), California (up from 53.7% to 60.5%), South Carolina (up from 35% to 41.2 %) and Montana (up from 40.5% to 45.7%).
Twelve of the 15 states with the biggest increases in the percentage of mortgaged homes considered seriously underwater from the fourth quarter of 2021 to the first quarter of 2022 were spread across the South and Midwest. They were led by Mississippi (share of mortgaged homes seriously underwater up from 12.2% to 17%), Missouri (up from 5.1% to 6.6%), Louisiana (up from 10% to 11.3%), Pennsylvania (up from 4.2% to 5.2%) and Delaware (up from 3.7% to 4.5%).
The highest levels of equity-rich properties around the U.S. remained in the West during the first quarter of 2022, with eight of the top 10 states located in that region. They were led by Idaho (68.8% of mortgaged homes were equity-rich), Vermont (68%), Utah (63.6%), Washington (60.9%) and Arizona (60.9%).
Twelve of the 15 states with the lowest percentages of equity-rich properties in the first quarter of 2022 were in the Midwest and South. The smallest portions were in Louisiana (21.6% of mortgaged homes), Mississippi (23.5%), Illinois (23.5%), Alaska (25.2%) and Wyoming (26.1%).
Nine of the 10 states with the highest shares of mortgages that were seriously underwater in the first quarter of 2022 were in the South and Midwest. The top five were Mississippi (17% seriously underwater), Louisiana (11.3%), Wyoming (10%), Iowa (7.4%) and Illinois (7.2%).
Only about 201,000 homeowners were facing possible foreclosure in the first quarter of 2022, or just three-tenths of 1% of the 58.1 million outstanding mortgages in the U.S. However, 180,000, or 90% of those facing possible lender takeover, had at least some equity built up in their homes.
"Positive equity should give financially distressed homeowners better options than their counterparts had during the Great Recession, when 33% of all homeowners were underwater on their mortgages," Sharga noted. "Hopefully these borrowers will be able to tap into their equity to refinance their debt, or be able to leverage it to sell their property and get a fresh start."
States with the highest percentages of homeowners who had equity in their properties and were facing foreclosure in the first quarter of 2022 included New Hampshire (99% with equity), Idaho (99%), Utah (99%), Washington (97%) and Colorado (97%). States with the lowest percentages included Mississippi (58% with equity), Louisiana (76%), Maryland (80%), Illinois (81%) and Kansas (82%).