ATTOM’s Q3 2022 U.S. Home Equity & Underwater Report shows that 48.5% of mortgaged residential properties in the United States were considered equity-rich in the third quarter, meaning that the combined estimated amount of loan balances secured by those properties was no more than 50% of their estimated market values.
The portion of mortgaged homes that were equity-rich in the third quarter of 2022 increased from 48.1% in the second quarter of 2022 and from 39.5% in the third quarter of 2021. The latest increase fell below other gains in recent years. But it 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,” says Rick Sharga, executive vice president of market intelligence at 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 (HELOCs) issued in the second quarter of 2022 rose by 43 percent from the prior year.”
The report also shows that just 2.9% of mortgaged homes, or one in 35, were considered seriously underwater in the third 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. The latest seriously underwater figure was the same as the 2.9% recorded in the prior quarter, but down from 3.4%, or one in 29 properties, in the third quarter of 2021.
Overall, 94.3 homeowners paying off mortgages had at least some equity built up in the third quarter of this year, compared to 92.9% a year earlier and 87.7% in the third quarter of 2020. That level rises further when accounting for homeowners who have paid off their mortgages.
Across the country, 39 states saw equity-rich levels increase from the second quarter of 2022 to the third quarter of 2022, while seriously underwater percentages dipped in 38 states. Year over year, equity-rich levels rose in all 50 states and seriously underwater portions dropped in 43 states.
The ongoing, but relatively small, improvement in home equity during the third quarter of 2022 came as the U.S. housing market cooled considerably amid multiple forces that threaten to stifle or reverse an 11-year run of nearly uninterrupted price spikes and equity gains.
Nine of the 10 states where the equity-rich share of mortgaged homes increased most from the second quarter of 2022 to the third quarter of 2022 were in the Midwest, Northeast and South regions of the U.S. The biggest increases were in South Dakota, where the portion of mortgaged homes considered equity-rich rose from 36.7% in the second quarter to 41.8% in the third quarter, Vermont (up from 71.4% to 75.9%), Montana (up from 48.1% to 51.5%), Indiana (up from 43% to 46.2%) and Mississippi (up from 29.1% to 31.5%).
The top five states where the equity-rich share of mortgaged homes decreased the most from the second quarter to the third quarter of this year were all in the West, led by Idaho (down from 69.5% to 65.8%), California (down from 63.1% to 60.6%), Utah (down from 64.3% to 62%), Washington (down from 63.2% to 61%) and Arizona (down from 64.8% to 63.4%).
The top 10 states with the biggest decreases in the percentage of mortgaged homes considered seriously underwater from the second quarter of 2022 to the third quarter of 2022 were spread across the Midwest, Northeast and West. They were led by Wyoming (share of mortgaged homes seriously underwater down from 7% to 2.9%), Montana (down from 3.9% to 3%), Kansas (down from 5.7% to 4.9%), Indiana (down from 3.8% to 3.1%) and Connecticut (down from 3.3% to 2.8%).
States where the percentage of seriously underwater homes increased the most from the second quarter to the third quarter of this year were concentrated in the West. While most of the increases were minimal, the largest were in Mississippi (up from 8.1% to 9%), California (up from 1% to 1.4%), Idaho (up from 1.6% to 1.9%), Hawaii (up from 1.3% to 1.5%) and Washington (up from 1% to 1.2%).
The highest levels of equity-rich properties around the U.S. remained in the West during the third quarter of 2022, with six of the top 10 states located in that region. The top states were Vermont (75.9% of mortgaged homes were equity-rich), Idaho (65.8%), Arizona (63.4%), Florida (62.8%) and Utah (62%).
Nine of the 10 states with the lowest percentages of equity-rich properties in the third quarter of 2022 were in the Midwest and South. The smallest portions were in Louisiana (24.5% of mortgaged homes), Illinois (26.3%), Alaska (26.7%), West Virginia (29.3%) and North Dakota (30.9%).
Among 107 metropolitan statistical areas around the nation with a population greater than 500,000, both the West and South dominated the list with the highest portion of mortgaged properties that were equity-rich in the third quarter of 2022. All but one of the top 25 were in those regions, led by Austin, Texas (71.6% equity-rich); Sarasota-Bradenton, Fla. (71.6%); San Jose, Calif. (70.6%); Fort Myers, Fla. (68.5%); and Tampa, Fla. (68.3%). The leader in the Northeast region again was Portland, Maine (63%) while the top metro in the Midwest continued to be Grand Rapids, MI (51.9%).
Eighteen of the 20 metro areas with the lowest percentages of equity-rich properties in the third quarter of 2022 were in the Midwest and South. The smallest levels were in Baton Rouge, La. (20.6% of mortgage homes were equity-rich); Jackson, Miss. (23.4%); Wichita, Kan. (26.1%); Little Rock, Ark. (27.4%); and Virginia Beach, Va. (27.9%).
The portion of mortgaged homes considered equity rich rose from the second quarter of 2022 to the third quarter of 2022 in 72 of the 107 metro areas with sufficient data (68%), while the level of mortgaged homes considered equity rich rose annually in 105 of the 107 (99%).
Among 1,627 counties that had at least 2,500 homes with mortgages in the third quarter of 2022, 47 of the top 50 equity-rich locations were in the Northeast, South and West.
Counties with the highest share of equity-rich properties were Chittenden County (Burlington), Vt. (85.2% equity-rich); Dukes County (Martha’s Vineyard), Mass. (84.7%); Blaine County, Idaho (outside Boise) (84.4%); Portage County, Wis. (west of Green Bay) (84.3%); and Nantucket County, Mass. (80.2%).
Counties with populations of at least 500,000 and the highest equity-rich rates were Travis County (Austin), Texas (74.1% equity-rich); Pinellas County (Tampa), Fla. (72.6%); Santa Clara County (San Jose), Calif. (71.5%); San Mateo County, Calif. (outside San Francisco) (69.6%); and Williamson County, Texas (outside Austin) (69.6%).
Counties with the smallest share of equity-rich homes in the third quarter of 2022 were Geary County (Junction City), Kan. (7.3% equity rich); Vernon Parish, La. (northwest of Lafayette) (9.2%); Iberville Parish, La. (outside Baton Rouge) (12.9%); Cumberland County (Fayetteville), N.C. (12.9%); and Lowndes County, Miss. (west of Birmingham, AL) (13.1%).
Counties with populations of at least 500,000 and the smallest equity-rich portions were Lake County, Ill. (outside Chicago) (25.4% equity-rich); Cook County (Chicago), Ill. (26.6%); Sedgwick County (Wichita), Kan. (27.1% equity-rich); Baltimore County, Md. (27.3%); and Kane County, Ill. (outside Chicago (27.4%).
Among 8,716 U.S. zip codes that had at least 2,000 residential properties with mortgages in the third quarter of 2022, there were 4,014 (46%) where at least half the mortgaged properties were equity-rich.
Thirty-two of the top 50 were in Florida and Texas, with six of the top 10 in Dukes County, Mass. and Collier County, Texas. They were led by zip codes 83333 in Hailey, Idaho (87.7% of mortgaged properties were equity-rich); 02539 in Edgartown, Mass. (86.9%); 34108 in Naples, Fla. (85.2%); 02568 in Vineyard Haven, Mass. (84.9%); and 34102 in Naples, Fla. (84.9%).
The top 10 states with the highest shares of mortgages that were seriously underwater in the third quarter of 2022 were in the South and Midwest. The top five were Louisiana (10.8% seriously underwater), Mississippi (9%), Iowa (6.5%), Illinois (6.2%) and Kentucky (6%).
The smallest shares were in Vermont (0.9% seriously underwater), Rhode Island (1.1%), Florida (1.2%), Washington (1.2%) and New Hampshire (1.2%).
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 third quarter of 2022 were Baton Rouge, La. (10.7%); Jackson, Miss. (8.9%); New Orleans, La. (7.8%); Syracuse, N.Y. (6.3%); and Scranton, Pa. (6.2%).
The portion of mortgages that were seriously underwater nationwide declined from the second quarter of 2022 to the third quarter of 2022 declined in 58, or 55%, of the 107 metro areas with enough data to analyze. Seriously underwater rates decreased, year over year, in 91 of those 107 metros (86%).
Among 8,716 U.S. zip codes that had at least 2,000 homes with mortgages in the third quarter of 2022, there were only 24 locations where more than 25% of mortgaged properties were seriously underwater. Of those, nine were in Cleveland, Ohio and Philadelphia, Pa.
The top five zip codes with the largest shares of seriously underwater properties in the third quarter of 2022 were 66441 in Junction City, Kan. (46.7% of mortgaged homes were seriously underwater); 39702 in Columbus, Miss. (45.7%); 10570 in Pleasantville, N.Y. (45.1%); 44108 in Cleveland, Ohio (43.1%); and 44112 in Cleveland, Ohio (38.7%).
Only about 227,100 homeowners were facing possible foreclosure in the third quarter of 2022, or just four-tenths of one percent of the 58.1 million outstanding mortgages in the U.S. Of those facing foreclosure, about 208,700, or 92%, had at least some equity built up in their homes.
“One of the reasons we don’t believe there will be another huge wave of foreclosures is that the overwhelming majority of financially-distressed homeowners do have positive equity,” Sharga notes. “If these borrowers can’t leverage the equity to refinance their current mortgage, they at least have the option of selling the property rather than losing their equity to a foreclosure auction. This option wasn’t available to distressed borrowers during the Great Recession, when many borrowers were underwater on their loans.”
States where the largest portion of homeowners facing possible foreclose had equity in their properties in the third quarter of 2022 included Utah (98% with equity), Washington (97%), Colorado (97%), Nevada (97%) and Arizona (97%). States with the lowest percentages included Mississippi (75% with equity), Louisiana (80%), Illinois (85%), Maryland (85%) and Missouri (87%).
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