ATTOM’s first-quarter 2024 U.S. Home Equity & Underwater Report shows nationwide equity levels declined slightly, but the spring homebuying season could hold things steady.
Across the nation, 45.8% of mortgaged residential properties were equity-rich at the start of the year, meaning the combined estimated amount of loan balances secured by those properties was no more than half of their estimated market values.
However, the portion of equity-rich homes is down from 46.1% from the fourth quarter of 2023, making it the third consecutive quarterly decline. Equity levels are also down from last year’s 47.2%, hitting the lowest level in two years.
Meanwhile, the portion of homes that fell seriously underwater had a slight uptick in the first few months of the year, from 2.6% to 2.7% of all residential mortgages. The report defines seriously underwater mortgages as those with combined estimated balances of loans secured by properties that are at least 25% more than those properties' estimated market values.
"Homeowner balance sheets continue to benefit in a huge way from the boom times in the form of elevated equity that can be used to help finance all kinds of things, from home renovations to business startups. Still, the windfalls are starting to erode bit-by-bit amid mounting signs that the market is no longer so super-heated," said ATTOM CEO Rob Barber.
The latest dip in equity started as the national median single-family home and condo value slipped 4% over the winter and was up just 3% from last year during the first quarter. When prices flatten or drop, equity follows even as homeowners pay off mortgages, because equity is based on mortgage debt as a portion of estimated property values.
"It's too early to make any broad statements about the market direction, especially coming off the typically slower fall and winter months. But amid the recent trends, this year's spring buying season will be of heightened importance in telling us if there is a new long-term market pattern developing,” Barber said.
The spring buying season could drive equity back up or hold it steady, the ATTOM report states. Factors that will influence equity levels include the tight supply of homes for sale, a strong investment market, and also mortgage interest rates that have climbed back above 7% for a 30-year loan on top of home prices that remain a financial stretch for average wage earners.
The biggest quarterly declines came from Southern regions of the country. Kentucky led the way; the portion of mortgaged homes considered equity-rich decreased from 35.4% in the fourth quarter of 2023 to 28.7% in the first quarter of 2024. Next, South Carolina went down from 42.4% to 40%. Then Georgia, down from 46% to 43.7%, Delaware, down from 39.4% to 37.2%, and Indiana, down from 43% to 40.9%.
At the other end of the scale, equity-rich levels rose in 23 states from the fourth quarter of 2023 to the first quarter of 2024, mostly by less than one percentage point. The largest improvements were concentrated in the Midwest and West regions, led by South Dakota, up from 49.8% to 51.5%, Hawaii, up from 55% to 56.5%, Montana, up from 57.3% to 58.7%, North Dakota, up from 30.4% to 31.5%, and Mississippi, up from 37.3% to 38.3%.
