HOME EQUITY FLATTENS OUT ACROSS U.S. IN FOURTH QUARTER OF 2022

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Feb 02, 2023, 00:01 ET

Nearly Half of Mortgaged Homes Remain Equity-Rich but Portion Dips Slightly;
Seriously Underwater Level of Mortgages Unchanged at Just Below 3 Percent;
Sixteen Times as Many Mortgages are Equity Rich Versus Seriously Underwater

IRVINE, Calif., Feb. 2, 2023 /PRNewswire/ -- ATTOM, a leading curator of real estate data nationwide for land and property data, today released its fourth-quarter 2022 U.S. Home Equity & Underwater Report, which shows that 48 percent of mortgaged residential properties in the United States were considered equity-rich in the fourth quarter, meaning that the combined estimated amount of loan balances secured by those properties was no more than 50 percent of their estimated market values.

The portion of mortgaged homes that was equity-rich in the fourth quarter of 2022 declined slightly from 48.5 percent in the third quarter of 2022, but was still up from 41.9 percent in the fourth quarter of 2021. While the equity-rich levels nationwide remain nearly double what it was three years ago, the drop-off in the last three months of 2022 reversed a string of 10 straight quarterly gains. The report found that the portion of equity-rich mortgage-payers went down from the third to the fourth quarter of 2022 in 31 states around the U.S.

The dip marked one of the first signs of how a recent fall in home prices across the country has started to affect homeowners following a decade-long market boom.

Despite the new pattern in equity-rich mortgages, however, the report also shows that just 2.9 percent of mortgaged homes, or one in 34, were considered seriously underwater in the fourth quarter of 2022. That meant that they had 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 unchanged from 2.9 percent in the prior quarter, and was still down from 3.1 percent, or one in 32 properties, in the fourth quarter of 2021.

Overall, 94.1 percent of homeowners paying off mortgages had at least some equity built up in their properties during the fourth quarter of last year. That also represented a slight decrease from 94.3 in the prior quarter, while still up from 93.5 percent a year earlier and 88.8 percent in late 2020. The portion of homeowners with equity rises further when accounting for homeowners who have paid off their home loans.

"Dents are beginning to surface in the armor around the U.S. housing market after 11 years of a strong showing for owners," said Rob Barber, CEO for ATTOM. "Home values have been dropping since the middle of last year, which appears to be starting to cut into homeowner equity around the country. That's probably happening because values are sinking faster than owners are paying off their mortgages. How that shakes out over the next few months will depend on a lot of factors, including where interest rates go. But for now, it looks like the runup in wealth flowing from owning homes has stalled along with the market."

Largest decline in equity-rich share of mortgages spread across West
The portion of equity-rich mortgages changed mostly by small amounts in different states from the third to the fourth quarter of 2022 – commonly by less than two percentage points. But the biggest drops were all in the West, following earlier quarters that saw larger gains in that region than elsewhere in the country. The fourth-quarter declines were led by Idaho (portion of mortgages homes considered equity-rich decreased from 65.8 percent in the third quarter of 2022 to 61.6 percent in the fourth quarter of 2022), Arizona (down from 63.4 percent to 59.9 percent), Nevada (down from 55.8 percent to 52.3 percent), Washington (down from 61 percent to 58.5 percent) and Oregon (down from 55 percent to 53.2 percent).

At the other end of the spectrum, the South had five of the top 10 states where the equity-rich share of mortgaged homes increased the most from the third quarter to the fourth quarter of 2022. The largest increases were in Montana (up from 51.5 percent to 58 percent), Kansas (up from 34 percent to 37 percent), Delaware (up from 34.2 percent to 35.9 percent), Mississippi (up from 31.5 percent to 33.2 percent) and Arkansas (up from 36.6 percent to 38 percent).

Small increases in seriously underwater mortgages clustered in West
While the portion of mortgage homes considered seriously underwater remained historically low in the fourth quarter of 2022 in most of the nation, the largest increases were clustered in the West. The top increases were in Missouri (share of mortgaged homes that were seriously underwater up from 5.2 percent in the third quarter of 2022 to 7.1 percent in the fourth quarter), Hawaii (up from 1.5 percent to 2 percent), Idaho (up from 1.9 percent to 2.2 percent), New Mexico (up from 2.7 percent to 3 percent) and Wyoming (up from 2.9 percent to 3.2 percent).

States where the percentage of seriously underwater homes decreased the most from the third quarter to the fourth quarter of last year were Mississippi (down from 9 percent to 6.8 percent), Delaware (down from 3.9 percent to 3 percent), Montana (down from 3 percent to 2.2 percent), Kansas (down from 4.9 percent to 4.3 percent) and Arkansas (down from 5.6 percent to 5.2 percent).

Equity-rich homeowners still concentrated in West
Despite seeing some of the largest decreases in equity-rich percentages, the West still had the highest levels of such properties around the U.S. in the fourth quarter of 2022, with seven of the top 10 states. Those with the highest portions were Vermont (76.6 percent of mortgaged homes were equity-rich), Florida (62.2 percent), Idaho (61.6 percent), California (61.5 percent) and Utah (60.3 percent).

Nine of the 10 states with the lowest percentages of equity-rich properties in the fourth quarter of 2022 were in the Midwest and South. They were led by Louisiana (24.5 percent of mortgaged homes were equity-rich), Illinois (26.2 percent), Alaska (27.1 percent), West Virginia (30.1 percent) and Iowa (30.9 percent).

Among 107 metropolitan statistical areas around the nation with a population greater than 500,000, the West and South again dominated the list of places with the highest portion of mortgaged properties that were equity-rich in the fourth quarter of 2022. All but one of the top 25 were in those regions, led by San Jose, CA (73.8 percent equity-rich); Sarasota-Bradenton, FL (70.5 percent); Fort Myers, FL (67.8 percent); San Francisco, CA (66.5 percent) and Los Angeles, CA (66.3 percent). The leader in the Northeast region again was Portland, ME (61.9 percent) while the top metro in the Midwest continued to be Grand Rapids, MI (50.5 percent).

Eighteen of the 20 metro areas with the lowest percentages of equity-rich properties in the fourth quarter of 2022 were in the Midwest and South. The smallest levels were in Baton Rouge, LA (20.5 percent of mortgage homes were equity-rich); Jackson, MS (25.1 percent); Virginia Beach, VA (27.9 percent); Chicago, IL (28.3 percent) and Little Rock, AR (28.8 percent).

The portion of mortgaged homes considered equity rich went down from the third quarter of 2022 to the fourth quarter of 2022 in 70 of the 107 metro areas with sufficient data (65 percent).

Top equity-rich counties still in Northeast, South and West
Among 1,625 counties that had at least 2,500 homes with mortgages in the fourth quarter of 2022, 48 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 (86.5 percent equity-rich); Dukes County (Martha's Vineyard), MA (84.1 percent); San Miguel County (Telluride), CO (80.4 percent); Nantucket County, MA (79.8 percent) and Washington County (Montpelier), VT (77.1 percent).

Counties with populations of at least 500,000 and the highest equity-rich rates were San Mateo County, CA (outside San Francisco) (76.3 percent equity-rich); Santa Clara County (San Jose), CA (74.8 percent); Pinellas County (Clearwater), FL (70.4 percent); Alameda County (Oakland), CA (70.1 percent) and Travis County (Austin), TX (69.5 percent).

Counties with the smallest share of equity-rich homes in the fourth quarter of 2022 were Geary County (Junction City), KS (7 percent equity-rich); Boone County, MO (8.1 percent); Greenup County, KY (east of Lexington) (10.7 percent); Vernon Parish, LA (northwest of Lafayette) (11 percent) and Iberville Parish, LA (outside Baton Rouge) (13.5 percent).

Counties with populations of at least 500,000 and the smallest equity-rich portions were Lake County, IL (outside Chicago) (25.4 percent equity-rich); Cook County (Chicago), IL (26.3 percent); Baltimore County, MD (27.2 percent); Du Page County, IL (outside Chicago) (27.5 percent) and Kane County, IL (outside Chicago (27.6 percent).

At least half of all mortgaged properties considered equity-rich in 50 percent of zip codes
Among 8,721 U.S. zip codes that had at least 2,000 residential properties with mortgages in the fourth quarter of 2022, there were 3,887 (46 percent) where at least half the mortgaged properties were equity-rich.

Forty-seven of the top 50 were in California, Florida, Massachusetts and Texas, with four of the top 10 in Collier County, FL. They were led by zip codes 02539 in Edgartown, MA (86.1 percent of mortgaged properties were equity-rich); 34108 in Naples, FL (86.1 percent); 34102 in Naples, FL (85.7 percent); 33477 in Jupiter, FL (84.9 percent) and 95130 in San Jose, CA (84.3 percent).

Largest shares of seriously underwater mortgages again in Midwest and South
The Midwest and South again had the top 10 states with the highest shares of mortgages that were seriously underwater in the fourth quarter of 2022. The top five were Louisiana (10.6 percent seriously underwater), Missouri (7.1 percent); Mississippi (6.8 percent), Illinois (6.3 percent) and Iowa (6.2 percent).

The smallest shares were in Vermont (0.9 percent seriously underwater), Rhode Island (1.1 percent), New Hampshire (1.2 percent), Florida (1.2 percent) and Massachusetts (1.3 percent).

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 fourth quarter of 2022 were Baton Rouge, LA (11 percent); New Orleans, LA (7.8 percent); Jackson, MS (7.5 percent); Syracuse, NY (6.6 percent) and Scranton, PA (6.3 percent).

While most seriously underwater rates around the country changed by less than one percentage point from the third to the fourth quarter of last year, the portion increased in 82, or 77 percent, of the 107 metro areas with enough data to analyze. Seriously underwater rates, however, remained down, year over year, in 66 percent of the metro areas analyzed.

More than 25 percent of residential mortgages seriously underwater in just 23 zip codes
Among 8,721 U.S. zip codes that had at least 2,000 homes with mortgages in the fourth quarter of 2022, there were only 23 locations where more than 25 percent of mortgaged properties were seriously underwater. Of those, seven were in Cleveland, OH, and Columbia, MO.

The top five zip codes with the largest shares of seriously underwater properties in the fourth quarter of 2022 were 65202 in Columbia, MO (73.9 percent of mortgaged homes were seriously underwater); 65203 in Columbia, MO (70.1 percent); 65201 in Columbia, MO (68.7 percent); 66441 in Junction City, KS (58.3 percent) and 10570 in Pleasantville, NY (45.1 percent).

More than 90 percent of homeowners facing foreclosure have at least some equity
Only about 234,400 homeowners were facing possible foreclosure in the fourth 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 216,000, or 92 percent, had at least some equity built up in their homes.

"Facing foreclosure is not nearly as impactful as it could be for the vast majority of homeowners because they have varying levels of financial cushion built up in their property," Barber said. "That should help them either refinance mortgages, or if they have to sell, still generate a profit from all the recent price increases."

States where the largest portion of homeowners facing possible foreclosure had equity in their properties in the fourth quarter of 2022, included Utah (98 percent with equity), Washington (97 percent), Idaho (97 percent), Colorado (96 percent) and Nevada (96 percent). States with the lowest percentages included Louisiana (82 percent with equity), Illinois (85 percent), Maryland (87 percent), North Dakota (87 percent) and Virginia (88 percent).

Report methodology

The ATTOM U.S. Home Equity & Underwater 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. The equity/LTV is calculated based on record-level loan model estimating position and amount of loans secured by a property and a record-level automated valuation model (AVM) derived from publicly recorded mortgage and deed of trust data collected and licensed by ATTOM nationwide for more than 155 million U.S. properties. The ATTOM Home Equity and Underwater report has been updated and modified to better reflect a housing market focused on the traditional home buying process. ATTOM found that markets where investors were more prominent, they would offset the loan to value ratio due to sales involving multiple properties with a single jumbo loan encompassing all of the properties. Therefore, going forward such activity is now excluded from the reports in order to provide traditional consumer home purchase and loan activity.

Definitions

Seriously underwater: Loan to value ratio of 125 percent or above, meaning the property owner owed at least 25 percent more than the estimated market value of the property.

Equity-rich: Loan to value ratio of 50 percent or lower, meaning the property owner had at least 50 percent equity.

About ATTOM
ATTOM provides premium property data to power products that improve transparency, innovation, efficiency and disruption in a data-driven economy. ATTOM multi-sources property tax, deed, mortgage, foreclosure, environmental risk, natural hazard, and neighborhood data for more than 155 million U.S. residential and commercial properties covering 99 percent of the nation's population. A rigorous data management process involving more than 20 steps validates, standardizes, and enhances the real estate data collected by ATTOM, assigning each property record with a persistent, unique ID — the ATTOM ID. The 30TB ATTOM Data Warehouse fuels innovation in many industries including mortgage, real estate, insurance, marketing, government and more through flexible data delivery solutions that include bulk file licenses, property data APIs, real estate market trends, property reports and more. Also, introducing our newest innovative solution, that offers immediate access and streamlines data management – ATTOM Cloud.

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