The Q1 2022 U.S. Home Equity & Underwater Report from ATTOM shows that 44.9% of mortgaged residential properties in the United States were considered equity-rich in the first quarter, meaning that the combined estimated amount of loan balances secured by those properties was no more than 50% of their homes estimated market values.
The portion of mortgaged homes that were equity-rich in the first quarter of 2022 inched close to half, up from 41.9% in the fourth quarter of 2021 and from 31.9% in the first quarter of 2021.
“Homeowners continue to benefit from rising home prices,” says Rick Sharga, executive vice president of market intelligence for ATTOM. “Record levels of home equity provide financial security for millions of families and minimize the chance of another housing market crash like the one we saw in 2008. But these higher home prices and rising interest rates make it extremely challenging for first-time buyers to enter the market.”
The report shows that just 3.2% of mortgaged homes, or one in 31, were considered seriously underwater in the first quarter of 2022, 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 virtually the same as the 3.1% level of all U.S. homes with a mortgage in the prior quarter, but still well down from 4.7%, or one in 21 properties, a year earlier.
Across the country, 45 states saw equity-rich levels increase from the fourth quarter of 2021 to the first quarter of 2022 while seriously underwater percentages increased in 28 states, albeit by less than 1% in most cases. Year over year, equity-rich levels rose in 48 states and seriously underwater portions dropped in 46 states.
These latest equity trends came as the decade-long U.S. housing market boom continued from late 2021 into early 2022, although at a slower pace. Nationwide, the median home price rose 2% during that time, to yet another record of $320,500. That left it 17% ahead year over year nationally and up by at least 10% in most of the country.
While market analysts generally are predicting a slowdown this year, the most recent gains happened as a glut of home buyers kept chasing a historically tight supply of properties for sale, kicking prices up even higher. The market remained strong amid an ongoing combination of 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.
Homeowner equity improved again in the first quarter of 2022 as rising home prices widened gaps between what homeowners owed on their mortgages and the value of their properties.
“It’s likely that equity will continue to grow through the rest of 2022, although home price increases should moderate as the year goes on,” Sharga adds. “Rising interest rates, the highest inflation in 40 years, and the ongoing supply chain disruptions due to the war in Ukraine are likely to weaken demand and slow down home price appreciation.”
The 15 states where the equity-rich share of mortgaged homes rose most from the fourth quarter of 2021 to the first quarter of 2022 were all in the western and southern regions of the U.S. states, with the biggest increases in New Mexico, where the portion of mortgaged homes considered equity-rich rose from 35.3% in the fourth quarter to 43.4% in the first quarter of 2022; Florida (up from 46.6% to 53.6%), California (up from 53.7% to 60.5%), South Carolina (up from 35% to 41.2%) and Montana (up from 40.5% to 45.7%).
States where the equity-rich share of mortgaged homes decreased from the fourth quarter of last year to the first quarter of this year were South Dakota (down from 36% to 32.3%), Mississippi (down from 26.3% to 23.5%), Louisiana (down from 22.5% to 21.6%), North Dakota (down from 29.3% to 28.6%) and Pennsylvania (down from 35.49% to 35.46%).
Twelve of the 15 states with the biggest increases in the percentage of mortgaged homes considered seriously underwater from the fourth quarter of 2021 to the first quarter of 2022 were spread across the South and Midwest. They were led by Mississippi (share of mortgaged homes seriously underwater up from 12.2% to 17%), Missouri (up from 5.1% to 6.6%), Louisiana (up from 10% to 11.3%), Pennsylvania (up from 4.2% to 5.2%) and Delaware (up from 3.7% to 4.5%).
States where the percentage of seriously underwater homes declined the most from the fourth quarter of last year to the first quarter of this year were Wyoming (down from 14.3% to 10%), Maine (down from 4.4% to 3.1%), Oklahoma (down from 5.5% to 4.8%), Alabama (down from 5.1% to 4.6%) and Montana (down from 3.4% to 3%).
The highest levels of equity-rich properties around the U.S. remained in the West during the first quarter of 2022, with eight of the top 10 states located in that region. They were led by Idaho (68.8% of mortgaged homes were equity-rich), Vermont (68%), Utah (63.6%), Washington (60.9%) and Arizona (60.9%).
Twelve of the 15 states with the lowest percentages of equity-rich properties in the first quarter of 2022 were in the Midwest and South. The smallest portions were in Louisiana (21.6% of mortgaged homes), Mississippi (23.5%), Illinois (23.5%), Alaska (25.2%) and Wyoming (26.1%).
Among 107 metropolitan statistical areas around the nation with a population greater than 500,000, the 30 with the highest shares of mortgaged properties that were equity-rich in the first quarter of 2022 were in the West and South. The top five were San Jose, Calif. (74.4% equity-rich); Austin, TX (73.8%); Boise, Idaho (70%); San Francisco, Calif. (68.1%) and Salt Lake City, Utah (65.2%). While Austin again led the South and San Jose led the West, the leader in the Northeast region was Portland, Maine (52.1%) and the top metro in the Midwest continued to be Grand Rapids, Mich. (49.1%).
Seventeen of the 20 metro areas with the lowest percentages of equity-rich properties in the first quarter of 2022 were in the Midwest and South. The smallest levels were in Baton Rouge, La. (18.1% of mortgage homes were equity-rich); Wichita, Kan. (19.6%); Jackson, Miss. (22.6%); Little Rock, Ark. (23.5%); and Chicago, Ill. (24.6%).
The portion of mortgaged homes considered equity rich rose from the fourth quarter of 2021 to the first quarter of 2022 in 103 of 106 metro areas with sufficient data in both time periods (97%) while the level rose annually in 105, or 99%.
Among 1,617 counties that had at least 2,500 homes with mortgages in the first quarter of 2022, 37 of the top 50 equity-rich locations were in the West.
Counties with the highest share of equity-rich properties were Dukes County (Martha’s Vineyard), Mass. (81.1% equity-rich); Teton County (Jackson), Wyo. (78.7%); San Mateo County, Calif. (outside San Francisco) (77.4%); Chittenden County (Burlington), Vt. (77.1%); and Nantucket County, Mass. (76.6%).
Counties with the smallest share were Vernon Parish, La. (northwest of Lafayette) (7.2% equity-rich); Otero County, N.M. (outside El Paso, Texas) (7.7%); Geary County (Junction City), Kan. (7.9%); Cumberland County (Fayetteville), N.C. (9.5% equity-rich); and Boone County (Columbia), Mo. (10%).
Among 8,705 U.S. zip codes that had at least 2,000 residential properties with mortgages in the first quarter of 2022, there were 3,247 (37%) where at least half the mortgaged properties were equity-rich.
Forty-one of the top 50 were in California and Texas, with 12 of the top 25 in Austin, Texas. They were led by zip codes 78739 in Austin, Texas (84.5% of mortgaged properties were equity-rich); 78733 in Austin, Texas (84.5%); 78617 in Del Valle, Texas (83.6%); 94703 in San Francisco, Calif. (83.6%); and 94116 in San Francisco, Calif. (83.4%).
Nine of the 10 states with the highest shares of mortgages that were seriously underwater in the first quarter of 2022 were in the South and Midwest. The top five were Mississippi (17% seriously underwater), Louisiana (11.3%), Wyoming (10%), Iowa (7.4%) and Illinois (7.2%).
Among 107 metropolitan statistical areas with a population greater than 500,000, those with the largest shares of mortgages that were seriously underwater in the first quarter of 2022 were Baton Rouge, La. (11.3%); Wichita, Kan. (8.6%); New Orleans, La. (8%); Jackson, Miss. (6.9%); and Youngstown, Ohio (6.8%).
Despite the slight quarterly increase in the level of seriously underwater mortgages nationwide, the portion actually declined in 62, or 58%, of the metro areas with enough data to analyze in both the fourth quarter of 2021 and the first quarter of 2022. Seriously underwater rates decreased, year over year, in 103 of those 107 metros (97%).
Among 8,705 U.S. zip codes that had at least 2,000 homes with mortgages in the first quarter of 2022, there were only 42 locations where more than 25% of mortgaged properties were seriously underwater. Of those, 20 were in Cleveland, Ohio; others were found in Columbia, Mo.; Detroit, Mich.; St. Louis, Mo.; and Philadelphia, Pa.
The top five zip codes with the largest shares of seriously underwater properties in the first quarter of 2022 were 39553 in Jackson, Miss. (55.2% of mortgaged homes were seriously underwater); 39564 in Jackson, Miss. (52%); 44108 in Cleveland, Ohio (48.8%); 46408 in Gary, Ind. (45.4%) and 65202 in Columbia, Mo. (45.2%).
Only about 201,000 homeowners were facing possible foreclosure in the first quarter of 2022, or just three-tenths of 1% of the 58.1 million outstanding mortgages in the U.S. However, 180,000, or 90% of those facing possible lender takeover, had at least some equity built up in their homes.
“Positive equity should give financially distressed homeowners better options than their counterparts had during the Great Recession, when 33 percent of all homeowners were underwater on their mortgages,” Sharga notes. “Hopefully these borrowers will be able to tap into their equity to refinance their debt, or be able to leverage it to sell their property and get a fresh start.”
States with the highest percentages of homeowners who had equity in their properties and were facing foreclosure in the first quarter of 2022 included New Hampshire (99% with equity), Idaho (99%), Utah (99%), Washington (97%) and Colorado (97%). States with the lowest percentages included Mississippi (58% with equity), Louisiana (76%), Maryland (80%), Illinois (81%) and Kansas (82%).
Photo by Kostiantyn Li on Unsplash