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Home Equity Flattens Out In Q4: ATTOM

David Krechevsky
Feb 02, 2023
Home Equity

Nearly half of mortgaged homes remain equity-rich, while level of seriously underwater mortgages remains unchanged.

  • 48% of U.S. mortgaged homes were 'equity-rich' in Q4, down from 48.5% in Q3.
  • Just 2.9% of mortgaged homes, or one in 34, were considered seriously underwater, unchanged from Q3.
  • Overall, 94.1% of homeowners paying off mortgages had at least some equity in their properties.

Almost half of residential properties with mortgages in the U.S. remained “equity rich” in the fourth quarter of last year, down slightly from the previous quarter, according to a new report.

ATTOM, the land and property data company, released its fourth-quarter 2022 U.S. Home Equity & Underwater Report on Thursday, showing that, for 48% of mortgaged homes, the combined estimated amount of loan balances secured by those properties was no more than 50% of their estimated market values.

The portion that was equity-rich in the fourth quarter declined slightly from 48.5% in the third quarter, but was still up from 41.9% a year earlier, ATTOM said. 

While the equity-rich levels nationwide remain nearly double what they were three years ago, the drop-off in the final three months of 2022 reversed a string of 10 straight quarterly gains. The report found that the portion of equity-rich mortgage-payers declined from the third to the fourth quarter in 31 states.

The dip marked one of the first signs of how a recent drop in home prices across the country has started to affect homeowners following a decade-long market boom, ATTOM said.

Homes Underwater Unchanged

The report also found that just 2.9% of mortgaged homes — or one in 34 — were considered seriously underwater in the fourth quarter of 2022, unchanged from a month earlier but down from 3.1% a year earlier. 

Mortgages are considered seriously underwater when the combined estimated balance of loans secured by the property are at least 25% more than the property’s estimated market value.

Overall, 94.1% of homeowners paying off mortgages had at least some equity in their properties during the fourth quarter, ATTOM said, down slightly from 94.3 in the third quarter but still up from 93.5% a year earlier and 88.8% in late 2020. 

The portion of homeowners with equity rises further when accounting for homeowners who have paid off their home loans, ATTOM said.

“Dents are beginning to surface in the armor around the U.S. housing market after 11 years of a strong showing for owners,” said Rob Barber, ATTOM CEO. “Home values have been dropping since the middle of last year, which appears to be starting to cut into homeowner equity around the country.”

Barber said that’s likely happening “because values are sinking faster than owners are paying off their mortgages. How that shakes out over the next few months will depend on a lot of factors, including where interest rates go. But for now, it looks like the runup in wealth flowing from owning homes has stalled along with the market.”

By Region

The portion of equity-rich mortgages changed mostly by small amounts — typically by less than 2 percentage points — in different states from the third to the fourth quarter, the report said. 

The biggest drops were all in the West, following earlier quarters that saw larger gains in that region than elsewhere in the country, ATTOM said. 

The fourth-quarter declines were led by Idaho — the portion of mortgages homes considered equity-rich decreased from 65.8% in the third quarter to 61.% in the fourth quarter — followed by Arizona (down from 63.4% to 59.9%), Nevada (down from 55.8% to 52.3%), Washington (down from 61% to 58.5%) and Oregon (down from 55% to 53.2%).

At the other end of the spectrum, the South had five of the Top 10 states where the equity-rich share of mortgaged homes increased the most from the third to the fourth quarter. The largest increases were in Montana (up from 51.5% to 58%), Kansas (up from 34% to 37%), Delaware (up from 34.2% to 35.9%), Mississippi (up from 31.5% to 33.2%) and Arkansas (up from 36.6% to 38%).

While the portion of mortgage homes considered seriously underwater remained historically low in the fourth quarter in most of the nation, the largest increases were clustered in the West, ATTOM said. 

The top increases were in Missouri (share of mortgaged homes seriously underwater up from 5.2% in the third quarter to 7.1% in the fourth quarter), Hawaii (up from 1.5% to 2%), Idaho (up from 1.9% to 2.2%), New Mexico (up from 2.7% to 3%) and Wyoming (up from 2.9% to 3.2%).

States where the percentage of seriously underwater homes decreased the most from the third to the fourth quarter were Mississippi (down from 9% to 6.8%), Delaware (down from 3.9% to 3%), Montana (down from 3% to 2.2%), Kansas (down from 4.9% to 4.3%) and Arkansas (down from 5.6% to 5.2%).

Despite seeing some of the largest decreases in equity-rich percentages, the West still had the highest levels of such properties around the U.S. in the fourth quarter, with seven of the top 10 states. Those with the highest portions were Vermont (76.6% of mortgaged homes were equity-rich), Florida (62.2%), Idaho (61.6%), California (61.5%) and Utah (60.3%).

Nine of the 10 states with the lowest percentages of equity-rich properties in the fourth quarter of 2022 were in the Midwest and South. They were led by Louisiana (24.5% of mortgaged homes were equity-rich), Illinois (26.2%), Alaska (27.1%), West Virginia (30.1%) and Iowa (30.9%).

Other Highlights

  • Among 107 metropolitan statistical areas around the nation with a population greater than 500,000, the West and South again dominated the list of places with the highest portion of mortgaged properties that were equity-rich in the fourth quarter of 2022. All but one of the top 25 were in those regions. 
  • Eighteen of the 20 metro areas with the lowest percentages of equity-rich properties in the fourth quarter of 2022 were in the Midwest and South. 
  • Among 1,625 counties that had at least 2,500 homes with mortgages in the fourth quarter of 2022, 48 of the top 50 equity-rich locations were in the Northeast, South and West.
  • The Midwest and South again had the top 10 states with the highest shares of mortgages that were seriously underwater in the fourth quarter of 2022. The top five were Louisiana (10.6%), Missouri (7.1%); Mississippi (6.8%), Illinois (6.3%) and Iowa (6.2%).
  • The smallest shares were in Vermont (0.9%), Rhode Island (1.1%), New Hampshire (1.2%), Florida (1.2%) and Massachusetts (1.3%).
  • Only about 234,400 homeowners faced possible foreclosure in the fourth quarter, or just 0,.4% of the 58.1 million outstanding mortgages in the U.S. Of those facing foreclosure, about 216,000, or 92%, had at least some equity built up in their homes.

“Facing foreclosure is not nearly as impactful as it could be for the vast majority of homeowners because they have varying levels of financial cushion built up in their property,” Barber said. “That should help them either refinance mortgages, or if they have to sell, still generate a profit from all the recent price increases.”

The ATTOM U.S. Home Equity & Underwater report provides counts of properties based on several categories of equity — or loan to value (LTV) — at the state, metro, county, and zip code level, along with the percentage of total properties with a mortgage that each equity category represents. 

The report is derived from publicly recorded mortgage and deed of trust data collected and licensed by ATTOM nationwide for more than 155 million U.S. properties.

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