HOME EQUITY TRENDS MIXED ACROSS U.S. IN THIRD QUARTER DESPITE CONTINUED PRICE INCREASES

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Nov 02, 2023, 00:01 ET

Equity-Rich Portion of Mortgaged Homes Slips at Fastest Pace in At Least Four Years;
But Seriously Underwater Level of Mortgages Improves;
Overall Equity for Homeowners Holds Steady

IRVINE, Calif. , Nov. 2, 2023 /PRNewswire/ -- ATTOM, a leading curator of land, property, and real estate data, today released its third-quarter 2023 U.S. Home Equity & Underwater Report, which shows that 47.4 percent 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 half of their estimated market values.

The portion of mortgaged homes that was equity-rich in the third quarter of 2023 decreased from 49.2 percent in the second quarter of 2023 – the largest quarterly decline since at least 2019. The latest figure also was down from 48.5 percent in the third quarter of 2022. Those declines happened despite home values rebounding recently from a fallback that had lasted from the middle of last year to the early part of this year.

But while equity-rich levels dropped in the third quarter, the report also shows that the portion of mortgaged homes that were seriously underwater in the U.S. continued to improve.

Just 2.5 percent of all residential mortgages, or one in 40, were considered seriously underwater in the third quarter of 2023. That meant 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 seriously underwater level dropped from one in 36 homes in the second quarter and from one in 35 in the third quarter of 2022, to the lowest point in at least four years.

"By all measures, homeowner equity around the country remained strong during the third quarter as millions of households kept benefitting from the nation's extended runup in home values. At the same, though, we saw an unusual downturn at the equity-rich end of the spectrum," said Rob Barber, chief executive officer for ATTOM. "That could have just been a temporary blip. It also could have reflected an increase in long-time owners who had lots of equity built up selling their homes, or perhaps borrowing against their rising wealth and slipping out of equity rich territory. The fourth quarter data should say more about whether residential equity in the U.S. has indeed topped out."

The mixed equity patterns came as the U.S. housing market continued recovering from the downturn that had threatened to end the decade-long run of price and equity growth.

The median nationwide single-family home price rose 11 percent over the second and third quarters of this year following an 8 percent drop from mid-2022 to early 2023. Values went back up as the job market remained strong, with the national unemployment rate below 4 percent, and consumer-price inflation was down to less than half the level of a year earlier. A strong investment market also put more money in the hands of potential buyers.

An ongoing tight supply of homes put additional upward pressure on prices along with a temporary lull in a two-year rise in home mortgage rates.

The potential for more uneven equity trends remains in place as mortgage rates rise toward 8 percent for a 30-year loan and the housing market heads into its annual slow season, which usually leads to smaller price increases or even small declines.

Equity-rich share of mortgages drops in almost 30 states
The portion of mortgages that were equity-rich went down in 29 of the 50 U.S. states from the second quarter of 2023 to the third quarter of 2023, commonly by one to four percentage points. The biggest declines came in the South region, led by South Carolina (portion of mortgages homes considered equity-rich decreased from 50 percent in the second quarter of 2023 to 43.7 percent in the third quarter of 2023), Florida (down from 60.4 percent to 54.4 percent), Kentucky (down from 42.1 percent to 37.1 percent), California (down from 63.3 percent to 58.5 percent) and Oklahoma (down from 36.5 percent to 32.5 percent).

At the other end of the scale, equity-rich levels rose in 21 states from the second quarter to the third quarter of this year, with the largest improvements concentrated in the Northeast region. The biggest increases were in South Dakota (up from 46.4 percent to 49.9 percent), Maine (up from 56 percent to 59.3 percent), Connecticut (up from 38.6 percent to 41.5 percent), New Jersey (up from 43 percent to 45.9 percent) and New Hampshire (up from 56.6 percent to 59.4 percent).

Seriously-underwater mortgage levels improve in most states
The portion of mortgaged homes considered seriously underwater dropped, and remained historically low, during the third quarter of 2023 in 43 states. The biggest decreases were clustered in the Midwest and the Northeast, a region that has some of the nation's higher levels of seriously underwater mortgages. The improvements were led by Indiana (share of mortgaged homes that were seriously underwater down from 8.1 percent in the second quarter of 2023 to 2.6 percent in the third quarter of 2023), Hawaii (down from 3.6 percent to 1.6 percent), South Dakota (down from 4 percent to 2.6 percent), Missouri (down from 4.8 percent to 3.9 percent) and Maine (down from 2.7 percent to 1.9 percent).

States where the percentage of seriously underwater homes increased the most from the second to the third quarter of this year were led by Wyoming (up from 3 percent to 5.9 percent), Mississippi (up from 5.8 percent to 7.4 percent), California (up from 1.1 percent to 1.6 percent), Idaho (up from 2.4 percent to 2.7 percent) and Louisiana (up from 10.5 percent to 10.8 percent).

Highest levels of equity-rich homeowners in Northeast and West
The 10 states with the highest levels of equity-rich mortgaged properties around the U.S. during the third quarter of 2023 were in the Northeast and West regions. Those with the largest portions were Vermont (79.8 percent of mortgaged homes were equity-rich), New Hampshire (59.4 percent), Maine (59.3 percent), Montana (59.1 percent) and California (58.5 percent).

Nine of the 10 states with the lowest percentages of equity-rich properties during the third quarter of 2023 were in the Midwest and South. The smallest portions were in Louisiana (19.7 percent of mortgaged homes were equity-rich), Illinois (29.8 percent), Alaska (29.8 percent), West Virginia (30.5 percent) and North Dakota (30.7 percent).

Among 107 metropolitan statistical areas around the nation with a population of at least 500,000, the West and South again dominated the list of places with the highest portion of mortgaged properties that were equity-rich. All but three of the top 25 metros were in those regions during the third quarter of 2023, led by San Jose, CA (75 percent equity-rich); San Diego, CA (66.4 percent); Los Angeles, CA (66.4 percent); San Francisco, CA (64.1 percent) and Portland, ME (63.5 percent). The leader in the South region again was Sarasota-Bradenton, FL (61.5 percent) while the top metro in the Midwest continued to be Grand Rapids, MI (54.3 percent).

The 10 metro areas with the lowest percentages of equity-rich properties in the third quarter of 2023 were in the Midwest and South. The smallest levels were in Baton Rouge, LA (15.1 percent of mortgage homes were equity-rich); New Orleans, LA (26.4 percent); Little Rock, AR (26.6 percent); Virginia Beach, VA (28.1 percent) and Jackson, MS (29.5 percent).

The portion of mortgaged homes considered equity rich declined from the second quarter of 2023 to the third quarter of 2023 in 79 of the 107 metro areas with sufficient data (74 percent) while the portion decreased from the third quarter of last year to the same period this year in 61 percent.

Top equity-rich counties clustered in Midwest, Northeast and West
Among 1,732 counties that had at least 2,500 homes with mortgages in the third quarter of 2023, the top 25 equity-rich locations were in the Midwest, Northeast and West regions.

Counties with the highest share of equity-rich properties were Chittenden County (Burlington), VT (86.8 percent equity-rich); Addison County (Middlebury), VT (86.4 percent); Benzie County (Beulah), MI (85 percent); Presque Isle County (Rogers City), MI (83.4 percent) and Sawyer County (Hayward), WI (82.8 percent).

Counties with populations of at least 500,000 and the highest equity-rich rates were Santa Clara County (San Jose), CA (76.2 percent equity-rich); San Mateo County, CA (outside San Francisco) (73 percent equity-rich); Alameda County (Oakland), CA (69.1 percent); Los Angeles County, CA (67.4 percent) and San Diego County, CA (66.4 percent).

Counties with the smallest share of equity-rich homes in the third quarter of 2023 were Campbell County (Gillette), WY (6.1 percent equity-rich); Iberville Parish, LA (outside Baton Rouge) (8.1 percent); Vernon Parish (Leesville), LA (8.3 percent); Ascension Parish, LA (outside Baton Rouge) (9.3 percent) and Greenup County, KY (11.8 percent).

Counties with populations of at least 500,000 and the smallest equity-rich portions were Baltimore City/County, MD (25.4 percent equity-rich); Cook County (Chicago), IL (28.4 percent); Prince George's County, MD (outside Washington, DC) (29.7 percent); Anne Arundel County (Annapolis), MD (30.9 percent) and Lake County, IL (outside Chicago) (31 percent).

At least half of all mortgaged properties considered equity-rich in about 40 percent of zip codes
Among 9,067 U.S. zip codes that had at least 2,000 residential properties with mortgages in the third quarter of 2023, there were 3,708 (41 percent) where at least half the mortgaged properties were equity-rich.

Thirty of the top 50 zip codes were in California, with 28 of the 50 in Los Angeles, San Diego, Santa Clara and Santa Cruz counties. The largest shares were in zip codes 11963 in Sag Harbor, NY (87 percent of mortgaged properties were equity-rich); 83340 in Ketchum, ID (86.5 percent); 95148 in San Jose, CA (86.1 percent); 95062 in Santa Cruz, CA (84.7 percent) and 92011 in Carlsbad, CA (84.7 percent).

Largest shares of seriously underwater mortgages remain in Midwest and South
The Midwest and South regions had nine of the top 10 states with the highest shares of mortgages that were seriously underwater in the third quarter of this year. The top five were Louisiana (10.8 percent seriously underwater), Mississippi (7.4 percent), Wyoming (5.9 percent), Kentucky (5.7 percent) and Iowa (5.2 percent).

The smallest shares were in Vermont (0.9 percent seriously underwater), New Hampshire (0.9 percent), Rhode Island (1 percent), Massachusetts (1 percent) and Florida (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 third quarter of 2023 were Baton Rouge, LA (11.8 percent); New Orleans, LA (7.6 percent); Syracuse, NY (6 percent); Jackson, MS (5 percent) and Little Rock, AR (4.5 percent).

While most seriously underwater rates around the country changed by less than one percentage point from the second quarter to the third quarter of this year, the portion decreased in 82, or 77 percent, of the metro areas in the U.S. with enough data to analyze. Seriously underwater rates were down, year over year, in 63 percent of the metro areas analyzed.

More than 20 percent of residential mortgages seriously underwater in just 30 zip codes
Among 9,067 U.S. zip codes that had at least 2,000 homes with mortgages in the third quarter of 2023, there were only 30 locations where more than 20 percent of mortgaged properties were seriously underwater. Of those, 10 were in Cleveland, OH, or Philadelphia, PA.

The top five zip codes with the largest shares of seriously underwater properties in the third quarter of 2023 were 82716 in Gillette, WY (50.8 percent of mortgaged homes were seriously underwater); 78041 in Laredo, RX (46 percent); 78045 in Laredo, TX (44.3 percent); 39601 in Brookhaven, MS (43.1 percent) and 82718 in Gillette, WY (40.5 percent).

Most homeowners facing foreclosure still have at least some equity
Only about 258,900 homeowners nationwide were facing possible foreclosure in the third quarter of 2023, or about one in every 242 mortgaged residential properties in the U.S. Of those facing foreclosure, about 238,200, or 92 percent, had at least some equity built up in their homes.

"Elevated equity levels continue to benefit even those homeowners facing possible foreclosure. They're providing resources for most delinquent owners to help them refinance their mortgages or sell instead of just walking away and abandoning their properties," Barber said. "That remains a powerful force working against blight, which can lead to vacant homes."

States where the largest portion of homeowners facing possible foreclosure had equity in their properties in the third quarter of 2023 included Utah (97 percent with equity), Massachusetts (95 percent), North Carolina (95 percent), Nevada (95 percent) and Maine (95 percent).

States with the lowest percentages included Louisiana (76 percent with equity), Maryland (86 percent), Illinois (86 percent), Missouri (87 percent) and Alabama (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 navigator and more. Also, introducing our newest innovative solution, that offers immediate access and streamlines data management – ATTOM Cloud.

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