Strong Housing Market Boosts Sharp Rise in Homeowner Equity
ATTOM, Irvine, Calif., said mortgage residential properties considered “equity-rich” jumped to nearly 42 percent in the fourth quarter as rising home prices boosted homeowner equity.
The company’s fourth quarter U.S. Home Equity & Underwater Report reported the portion of mortgaged homes that were equity-rich in the fourth quarter – nearly one of every two – was up from 39.5 percent in the third quarter and from 30.2 percent a year ago.
The report also said just 3.1 percent of mortgaged homes, or one in 32, were considered seriously underwater in the fourth quarter, with a combined estimated balance of loans secured by the property of at least 25 percent more than the property’s estimated market value. That was down from 3.4 percent of all U.S. homes with a mortgage in the prior quarter and 5.4 percent, or one in 18 properties, a year earlier.
Across the country, 48 states saw equity-rich levels increase from the third quarter to the fourth quarter, while seriously underwater percentages decreased in 46 states. Year over year, equity-rich levels rose in 49 states, including the District of Columbia, as seriously underwater portions dropped in 48 states (including D.C.)
Todd Teta, chief product officer with ATTOM, said the latest gains at both ends of the equity scale came as the U.S. housing market concluded one of its best years in the past decade, even as the national economy was only gradually recovering from the worldwide coronavirus pandemic. The market surged amid a flood of new home buying spurred heavily by 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. The fourth-quarter saw some of the biggest improvements in the past few years in the portions of mortgage payers who were either equity-rich or seriously underwater.
“Another quarter, another boost to the balance sheets of homeowners in most of the United States – that was the story from the fourth quarter of last year,” Teta said. “As home prices kept rising, so did the equity built up in residential properties, to the point where close to half of all mortgage payers around the country found themselves in equity-rich territory. No doubt, there are market metrics that pose warnings about how long the boom can last and equity can keep improving. We keep watching those closely. But for now, homeowners are sitting pretty as the wealth they have tucked away in their homes keeps growing.”
The West and South had 13 of the 15 states where the equity-rich share of mortgaged homes rose most from the third quarter to the fourth quarter. States with the biggest increases were Tennessee, where the portion of mortgaged homes considered equity-rich rose from 41.4 percent in the third quarter to 47.2 percent in the fourth quarter, North Carolina (up from 38.6 percent to 44.2 percent), Nevada (up from 44.9 percent to 49.8 percent), Georgia (up from 35.3 percent to 40.1 percent) and Arizona (up from 53.2 percent to 57.6 percent).
Fourteen of the 15 states with the biggest declines in the percentage of mortgaged homes considered seriously underwater from the third quarter to the fourth quarter were in the South and Midwest. They were led by Mississippi (from 17.7 percent to 12.2 percent), Maine (down from 5.8 percent to 4.4 percent), Iowa (down from 8.4 percent to 7 percent), West Virginia (down from 7.1 percent to 5.9 percent) and Arkansas (down from 7 percent to 5.9 percent).
The highest levels of equity-rich properties around the U.S. remained in the West during the fourth quarter. Nine of the top 10 states with the highest levels in the fourth quarter were in that region, led by Idaho (66.7 percent of mortgaged homes were equity-rich), Vermont (64.8 percent), Utah (62.5 percent), Washington (58.6 percent) and Arizona (57.6 percent).