ATTOM: 4Q Home Equity Improves
ATTOM Data Solutions, Irvine, Calif., released its fourth-quarter U.S. Home Equity & Underwater Report, which noted an increase to 17.8 million residential properties in the United States considered equity-rich—the combined estimated amount of loans secured by those properties was 50 percent or less of their estimated market value.
The report said equity-rich properties in the fourth quarter represented 30.2 percent, or about one in three, of the 59 million mortgaged homes in the United States, up from 28.3 percent in the third quarter, 27.5 percent in the second quarter and 26.7 percent in the a year ago, despite the ongoing economic damage caused by the coronavirus pandemic.
The report also shows that 3.2 million, or one in 18, mortgaged homes in the fourth quarter were considered seriously underwater, with a combined estimated balance of loans secured by the property at least 25 percent more than the property’s estimated market value. That figure represented 5.4 percent of all U.S. properties with a mortgage, down from 6 percent in the prior quarter, 6.2 percent in the second quarter and 6.4 percent a year ago.
Todd Teta, chief product officer with ATTOM Data Solutions, said the continued home-equity improvement during the fourth quarter came as the U.S. housing market closed out one of its best years in the past decade, with the national median home price soaring 13 percent. Values spiked and the nation’s nine-year housing market boom surged ahead even as the Coronavirus pandemic idled or slowed major sectors of the American economy, throwing millions of people out of work. Market gains resulted from a bubble of buyers who largely escaped the pandemic’s financial damage looking to take advantage of super-low interest rates and, in many cases, escape congested, virus-prone urban areas.
“When it came to homeowner equity in the United States, the fourth quarter was more of the same as the third, which was more of the same as the second: a scenario that has continued to improve,” Teta said. “The housing market kept booming despite damage caused by the virus pandemic to the broader economy – a surge that continued to boost the equity that most property owners have in their homes. As with many other housing-market metrics, the prospects for equity building even further in 2021 are wholly uncertain because of many questions surrounding the pandemic and the U.S. economy. But for now, homeowners are sitting pretty on a growing reserve of personal wealth.”
Other report findings:
–Six of the 10 states with the biggest gains in the share of equity-rich homes from the third quarter to the fourth quarter were in the West. The top five were California, where the portion of mortgaged homes considered equity-rich rose from 39.7 percent in the third quarter of 2020 to 46.1 percent in the fourth quarter, Idaho (up from 39.5 percent to 42.7 percent), Montana (up from 31.9 percent to 34.8 percent), Arizona (up from 29.4 percent to 32.3 percent) and Vermont (up from 45.1 percent to 47.8 percent).
–Five of the 10 states with the biggest declines from the third quarter to the fourth quarter in the percentage of homes considered seriously underwater were in the South. They were led by West Virginia, (down from 13.8 percent to 11.4 percent), California (down from 3.7 percent to 2.4 percent), Mississippi (down from 12.6 percent to 11.4 percent), Arkansas (down from 11.7 percent to 10.7 percent) and New Jersey (down from 6.7 percent to 5.7 percent).
“The good news is that fewer and fewer homeowners across the country are underwater on their loans,” said Rick Sharga, executive vice president of RealtyTrac, an ATTOM Data Solutions company. “But for those homeowners who are, the uncertainty of the economy during the pandemic looms large. The dual-trigger effect of losing a job and being underwater on a mortgage often unfortunately leads to a foreclosure.”
–Despite improvements in the Midwest and South during the fourth quarter, the Northeast and West again had far higher levels of equity-rich properties. The top 12 states with the highest levels in the fourth quarter were all in the Northeast and West, led by Vermont, (47.8 percent equity-rich), California (46.1 percent), Idaho (42.7 percent), Washington (41 percent) and Hawaii (40.4 percent).
–Among 107 metropolitan statistical areas with a population greater than 500,000, the 10 with the highest shares of equity-rich properties in the fourth quarter of 2020 again were in the West, with the top five in California. They were led by San Jose, Calif. (65.7 percent equity-rich); San Francisco (57.5 percent); Los Angeles (51.7 percent); Santa Rosa, Calif. (45.1 percent) and San Diego (44.5 percent). The leader in the Northeast region again was Boston (38.9 percent), while Austin, Texas, again led the South (39.1 percent) and Grand Rapids, Mich., continued to top the Midwest (32.8 percent).
–Among 1,547 counties that had at least 2,500 properties with mortgages in the fourth quarter of 2020, 23 of the top 25 equity-rich locations were in the West or Northeast regions. The highest concentration again was in the San Francisco Bay area of California.
–The top 10 states with the highest shares of mortgages that were seriously underwater in the fourth quarter were all in the South and Midwest, led again by Louisiana (14.9 percent underwater), Mississippi (11.4 percent), West Virginia (11.4 percent), Iowa (11.3 percent) and Arkansas (10.7 percent). The smallest percentages were in Washington (2.2 percent), Oregon (2.3 percent), California (2.4 percent), Utah (2.5 percent) and Arizona (2.6 percent).
–Among 107 metropolitan statistical areas with a population greater than 500,000, those with the highest share of mortgages that were seriously underwater in the fourth quarter were Baton Rouge, La. (14.2 percent); Syracuse, N.Y. (14 percent); Youngstown, Ohio (12.5 percent); Toledo, Ohio (11.3 percent) and Scranton, Pa. (11.2 percent).