Homeowner equity soars across US

As home values keep rising even those facing foreclosure have positive equity.

Half of all US mortgaged homes are now considered equity-rich, according to a new report by real estate data curator, ATTOM.

According to the US Home Equity and Underwater report for Q2, 48.1% of mortgaged residential properties in the country were considered equity-rich in the second quarter this year, meaning that the combined estimated amount of loan balances secured by those properties was no more than 50% of their estimated market values. Data was collected on more than 155 million properties across the US.

The 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.

‘Equity-rich’ properties are those with a loan to value ratio of 50% or lower, meaning the property owner had at least 50% equity, while ‘seriously underwater’ properties are those with a loan to value ratio of 125% or above, meaning the property owner owed at least 25% more than the estimated market value of the property.

The portion of mortgaged homes that were equity-rich in the second quarter increased from 44.9% in the first quarter and from 34.4% in the second quarter.

The latest increase, covering almost half of all mortgage payers in the US, marked the ninth straight quarterly rise in the portion of homes in the equity-rich territory. The report found that at least half of all mortgage-payers in 18 states were equity-rich in Q2, compared to only three states a year earlier.

Rick Sharga, executive vice president of market intelligence at ATTOM, said he was not surprised by the report’s findings, given how property prices had been rising for so long.

He said: “After 124 consecutive months of home price increases, it’s no surprise that the percentage of equity rich homes is the highest we’ve ever seen, and that the percentage of seriously underwater loans is the lowest.

“While home price appreciation appears to be slowing down due to higher interest rates on mortgage loans, it seems likely that homeowners will continue to build on the record amount of equity they have for the rest of 2022.”

ATTOM’s report also revealed that only 2.9% of mortgaged homes, or one in 34, were considered seriously underwater in Q2, with a combined estimated balance of loans secured by the property of at least 25% more than the property’s estimated market value. That was down from 3.2% of all homes with a mortgage compared to the previous quarter and 4.1%, or one 24 properties, a year earlier.

Across the US, every state except one saw equity-rich levels increase this year due to the fact that home values have kept increasing, while seriously underwater percentages fell in 46 states.

After a flat first quarter, the median single-family home price shot up another 9% quarterly and 15% annually during the Spring of this year to a new high of $346,000.

The report noted that for owners keeping up with mortgage payments – including many that weren’t – that meant a widening gap between what they owed and what their homes were worth, boosting more home values into equity-rich status.

Equity continued “on a relentless upward path” despite home-mortgage rates doubling this year, inflation soaring to a 40-year high and rising fuel costs, among other issues.

Despite the economic uncertainty, the report stressed that there was “little immediate sign that equity gains will flatten out”, mostly because of a “historically tight” supply of properties for sale.

Broken down by region, seven of the 10 states where the equity-rich share of mortgaged homes increased the most between Q1 and Q2 were in the south.

The biggest increases were in Wyoming, where the portion of equity-rich mortgaged homes rose from 26.1% in the first quarter to 33.9% in Q2, Maine, Florida, Mississippi and South Carolina.

By contrast, states where the equity-rich share of mortgaged homes decreased, or went up the least, during the same period were New Jersey (down from 38.6% to 37.9%), Utah, Idaho, North Dakota and West Virginia.

In addition, the largest declines in seriously underwater properties spread across the Northeast, South and Midwest, led by Mississippi (share of mortgaged homes seriously underwater down from 17% to 8.1%), Wyoming, Missouri, Maine and Connecticut.

The only states where the percentage of seriously underwater homes increased from the first quarter to the second quarter were Montana (up from 3% to 3.9%), New Jersey and New York.

Significantly, more than 90% of homeowners facing foreclosure have at least some equity.

Only about 214,800 homeowners were facing possible foreclosure in Q2, the equivalent of just four-tenths of 1% of the 58.2 million outstanding mortgages in the US. Of those facing foreclosure, about 195,400, or 91%, had at least some equity built up in their homes.
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Sharga said: “The fact that over 90% of homeowners in foreclosure have positive equity is good news for borrowers who find themselves in financial distress. These homeowners have the opportunity to leverage this equity to either secure short-term financing to resolve their delinquencies, or to sell their properties at a profit and avoid a foreclosure auction.”