ATTOM: Underwater Properties Down, Equity-Rich Properties Up

ATTOM Data Solutions, Irvine, Calif., reported seriously underwater residential properties fell by one million in 2016 from 2016 and by more than 7.1 million from the market low point in 2012.

The company’s 2016 U.S. Home Equity & Underwater Report also noted the number of “equity-rich” properties increased by 1.3 million from a year ago.

However, the report noted equity lost during the financial downturn helped keep average homeownership tenure elevated, at nearly twice pre-recession levels.

The report said as of the end of 2016 5.4 million U.S. properties remained seriously underwater–where the combined loan amount secured by the property was at least 25 percent higher than the property’s estimated market value–a decrease of 1.028 million properties from a year ago. Those properties represented 9.6 percent of all U.S. properties with a mortgage, down from 10.8 percent at the end of third quarter and down from 11.5 percent at the end of 2015.

“Since home prices bottomed out nationwide in the first quarter of 2012, the number of seriously underwater U.S. homeowners has decreased by about 7.1 million, an average decrease of about 1.4 million each year,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. “Meanwhile, the number of equity rich homeowners has increased by nearly 4.8 million over the past three years, a rate of about 1.6 million each year.

The report said between 2000 and 2008, average homeownership tenure nationwide was 4.26 years, but that average tenure has been trending steadily higher since 2009, reaching a new record high 7.88 years for homeowners who sold in 2016.

“Despite this upward trend over the past five years, the massive loss of home equity during the housing crisis forced many homeowners to stay in their homes longer before selling, effectively disrupting the historical domino effect of move-up buyers that feeds both demand for new homes and supply of inventory for first-time homebuyers,” Blomquist said.

ATTOM reported nearly 14 million (13.877 million) equity-rich. Properties–where the combined loan amount secured by the property was 50 percent or less of the property’s estimated market value–an increase of nearly 1.3 million from a year ago. This represented 24.6 percent of all U.S. properties with a mortgage, up from 23.4 percent at the end of Q3 2016 and up from 22.5 percent at the end of 2015.

States with highest share of seriously underwater properties were Nevada (19.5 percent); Illinois (16.6 percent); Ohio (16.3 percent); Missouri (14.6 percent); and Louisiana (14.5 percent).

Among 88 metropolitan statistical areas with a population of at least 500,000 and sufficient home value and loan data, those with the highest share of seriously underwater properties were Las Vegas (22.7 percent); Cleveland (21.5 percent); Akron, Ohio (20.1 percent); Dayton, Ohio (20.0 percent); and Toledo, Ohio (19.9 percent).

States with the highest share of equity rich properties at the end of 2016 were Hawaii (37.8 percent), Vermont (36.9 percent); California (36.0 percent); New York (34.9 percent); and Oregon (32.0 percent). Among 88 metropolitan statistical areas with a population of at least 500,000 and sufficient home value and loan data, those with the highest share of equity rich properties were San Jose, Calif. (51.6 percent); San Francisco (47.7 percent); Honolulu (39.8 percent); Los Angeles (39.2 percent); and Pittsburgh, Pa. (35.8 percent).

Other key data:

–19.4 percent of non-owner occupied (investment) properties with a mortgage were underwater as of the end of 2016 compared to only 6.8 percent of owner-occupied properties.
–12.6 percent of properties in high-risk flood zones were seriously underwater (above national average of 9.6 percent).
–Based on years owned range, the highest share of underwater properties is those that have been owned between 10 and 15 years (12.0 percent), followed by those that have been owned five to 10 years (10.6 percent). The lowest share of seriously underwater properties were those owned more than 20 years (7.2 percent) followed by those owned between one and five years (8.6 percent).
–27.9 percent of all properties secured by loans originated in 2006 were seriously underwater at the end of 2016, the highest share of seriously underwater of any loan vintage in the last 20 years, followed by 2007 vintage (23.5 percent seriously underwater) and 2005 vintage (21.5 percent seriously underwater).
–16.5 percent of properties located in high-risk flood zones were equity rich as of the end of 2016, below the national average of 24.6 percent.
–Based on years owned range, the highest share of equity rich were for properties owned more than 20 years (45.4 percent), followed by those owned 15 to 20 years (32.4 percent).
–47.4 percent of all properties secured by 1998 vintage loans were equity rich at the end of 2016, the highest share of equity rich of any loan vintage in the last 20 years, followed by 1999 vintage (44.7 percent equity rich) and 2000 vintage (40.8 percent equity rich).
–Among 316 metropolitan statistical areas analyzed for homeownership tenure, there were 54 (17 percent) where the average homeownership tenure for sellers in 2016 decreased compared to a year ago, including Denver; Orlando; Louisville, Kentucky; Tucson, Ariz.; and Fresno, Calif.
–The remaining 262 markets (83 percent) where the average homeownership tenure increased in 2016 compared to 2015 included New York; Los Angeles; Chicago; Dallas; and Houston.
–Among 52 metro areas with a population of at least 1 million, those with the longest average homeownership tenure for homes sold in 2016 were Hartford, Conn. (11.57 years); Providence, R.I. (10.36 years); Boston (10.04 years); San Francisco (9.92 years); and San Jose, Calif. (9.79 years).
–Among those same 52 metro areas with a population of at least 1 million, those with the shortest average homeownership tenure in 2016 were Rochester, N.Y. (4.67 years); New Orleans (4.85 years); Louisville, Ky. (4.93 years); Virginia Beach (5.37 years); and Atlanta (5.66 years).

The Mortgage Bankers Association will release its Fourth Quarter National Delinquency Survey on Wednesday, Feb. 15.

The NDS, conducted by MBA since 1953, covers 38 million loans on one- to four- unit residential properties. Loans surveyed were reported by more than 100 lenders, including mortgage bank, commercial banks and thrifts.