Housing Market Roundup, Nov. 3, 2022: Homeowner Equity Keeps Rising; 98% of Metros See Decline in Home Prices

Here’s a quick summary of recent housing market articles that have come across the MBA NewsLink desk:

ATTOM: Homeowner Equity Keeps Growing Despite Housing Market Slowdown

ATTOM, Irvine, Calif., released its third-quarter 2022 U.S. Home Equity & Underwater Report, showing 48.5 percent of mortgaged residential properties in the United States were considered equity-rich in the third quarter, up from 48.1 percent in the second quarter and 39.5 percent a year ago.

The increase, while below other gains in recent years, still marked the 10th straight quarterly rise, and resulted in virtually half of all mortgage payers landing in equity-rich territory. The report found that at least half of all mortgage-payers in 20 states were equity-rich in the third quarter, compared to only seven states a year earlier.

“Even though home price appreciation has slowed down dramatically in recent months, homeowners have continued to build equity,” said Rick Sharga, executive vice president of market intelligence with ATTOM. “And it appears that many of those homeowners have decided to stay where they are rather than purchase a new home, and are beginning to tap into that equity, as the number of home equity lines of credit issued in the second quarter of 2022 rose by 43 percent from the prior year.”

The report also shows that just 2.9 percent of mortgaged homes, or one in 35, were considered seriously underwater in the third 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. The latest seriously underwater figure was the same as the 2.9 percent recorded in the prior quarter, but down from 3.4 percent, or one in 29 properties, a year ago.

Overall, the report said, 94.3 homeowners paying off mortgages had at least some equity built up in the third quarter, compared to 92.9 percent a year earlier and 87.7 percent in 2020. That level rises further when accounting for homeowners who have paid off their mortgages.

Knock: 98 of 100 Largest U.S. Markets Saw September Home Prices Decline from 2022 Peaks

Knock, New York, said the cooling trend in the U.S. housing market is expected to continue with more markets seeing home prices decline by this time next year as the shift to a buyer’s market continues to take hold.

The Knock Buyer-Seller Market Index found home prices in 98 markets in September were below their peak price this spring. Providence, R.I., and Salisbury, Md., were the only markets where home prices have remained at their peaks set earlier this year.

In 15 markets, prices dropped by 10% and prices in 42 markets are projected to fall further from their 2022 records by September 2023. The total number of buyers’ markets increased to 16, more than double from August. This is expected to grow to 27 by September 2023.

“The shift to a more balanced market is still in its early stages,” said Knock Co-Founder and CEO Sean Black. “We expect that this much-needed reset will persist through much of 2023, and although prices will again begin to rebound they likely won’t return to their peaks for the foreseeable future.”

Black noted while many drivers of the housing market, such as demographics and record low unemployment, have not changed, higher rates and home prices have put affordability at the worst levels in 30 years with entry-level monthly payments set to be 34% higher in 2022 vs 2021. “The good news is that as prices soften and rates stabilize once the Fed is done with its aggressive rate hike campaign, hopefully after its meeting in November, buyers will be ready to re-enter the market and sellers will retain the majority of the equity gains they’ve seen in the last two years,” he said.