ATTOM, curator of the nation’s premier property database, today released its third-quarter 2021 U.S. Home Equity & Underwater Report, which shows that 39.5 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 50 percent of their estimated market value.
The portion of mortgaged homes that were equity-rich in the third quarter of 2021 – one in three – was up from 34.4 percent in the second quarter of 2021 and from 28.3 percent in the third quarter of 2020.
The report also shows that just 3.4 percent of mortgaged homes, or one in 29, were considered seriously underwater in the third quarter of 2021, with a combined estimated balance of loans secured by the property of at least 25 percent more than the property’s estimated market value. That was down from 4.1 percent of all U.S. homes with a mortgage in the prior quarter and 6 percent, or one 17 properties, a year ago.
Across the country, 46 states including the District of Columbia saw equity-rich levels increase from the second quarter to the third quarter of 2021, while seriously underwater percentages decreased in 39 states. Year over year, equity-rich levels rose in 49 states including the District of Columbia, and seriously underwater portions dropped in 47 states including the District of Columbia.
The improvements at both ends of the equity scale represented some of the largest quarterly gains in two years and provided yet another sign of how strong the U.S. housing market remained in the third quarter, even as the broader economy only gradually recovered from damage resulting from the Coronavirus pandemic that hit early last year.
Equity increases during the months running from July through September came as the median home price nationwide rose 4 percent quarterly and 16 percent year over year, to a new record of $310,500. Median vales rose up at least 10 percent annually in two-thirds of metro-areas around the country. Those ongoing price runups continued boosting equity because they widened gaps between what homeowners owed on their mortgages and the value of their properties.
Prices have continued rising over the past year amid rock-bottom mortgage rates and a desire of many households to flee virus-prone areas for the perceived safety of a house and yard or find more space to accommodate new work-at-home lifestyles. That has generated a bubble of home buyers chasing a tight supply of properties for sale throughout the past year and a half, spiking demand and boosting home values.
Some signs of a possible market slowdown have emerged recently in the form of declining home affordability, rising foreclosures and falling investor profits. But the third-quarter price and equity gains shined as prime examples of how the housing market boom continues surging through its 10th straight year.
“Homeowners across most of the United States could sit back with a smile yet again in the third quarter and watch their balance sheets grow as soaring home prices pushed their equity levels ever higher. Amid the best gains in two years, nearly four of every 10 owners found themselves in equity-rich territory,” said Todd Teta, chief product officer with ATTOM. “For sure, some uncertainty lies ahead as other key market barometers have been a bit shaky as of late. And the Coronavirus pandemic remains a threat. But there is no doubt that homeowners continue benefitting big-time from the relentless home price increases we are seeing around the country.”
Western and southern states show biggest improvement in equity-rich share of homes
Eight of the top 10 states where the equity-rich share of mortgaged homes rose most from the second quarter of 2021 to the third quarter of 2021 were in the West and South. States with the biggest increases were Utah, where the portion of mortgaged homes considered equity-rich rose from 45.5 percent in the second quarter of 2021 to 60.9 percent in the third quarter, Arizona (up from 39.7 percent to 53.2 percent), Idaho (up from 54.2 percent to 65.1 percent), North Carolina (up from 28.4 percent to 38.6 percent) and Nevada (up from 34.9 percent to 44.9 percent).
The states where the equity-rich share of mortgaged homes decreased most from the second to the third quarter of this year were Kansas (down from 31.4 percent to 27.1 percent), Wyoming (down from 29.5 percent to 25.8 percent), Mississippi (down from 26.6 percent to 23 percent), Montana (down from 40.8 percent to 38.5 percent) and California (down from 53.8 percent to 52.1 percent).
South and Midwest show largest declines in underwater properties
The top 10 states with the biggest declines from the second quarter of 2021 to the third quarter of 2021 in the percentage of mortgaged homes considered seriously underwater were in the South and Midwest. They were led by West Virginia (share of mortgaged homes seriously underwater down from 11.7 percent to 7.1 percent), Ohio (down from 7.8 percent to 5.4 percent), Arkansas (down from 8.8 percent to 7 percent), Michigan (down from 5.4 percent to 3.7 percent) and Kentucky (down from 7.7 percent to 6.2 percent).
States where the percentage of seriously underwater homes rose most from the second to the third quarter of 2021 were Mississippi (up from 7.6 percent to 17.7 percent), Wyoming (up from 3.6 percent to 11.5 percent), Maine (up from 3.4 percent to 5.8 percent), Kansas (up from 4.6 percent to 6.7 percent) and Montana (up from 3 percent to 3.6 percent).
Largest shares of equity-rich homes still in West; smallest in Midwest and South
The West continued to have far higher levels of equity-rich properties than other regions in the third quarter of 2021. Eight of the top 10 states with the highest levels in the third quarter were in the West, led by Idaho (65.1 percent of mortgaged homes were equity-rich), Vermont (61.2 percent), Utah (60.9 percent), Washington (56.2 percent) and Arizona (53.2 percent).
Thirteen of the 15 states with the lowest percentages of equity-rich properties in the third quarter of 2021 were in the Midwest and South, led by Louisiana (19.8 percent of mortgaged homes), Illinois (21.5 percent), Alaska (23 percent), Mississippi (23 percent) and Oklahoma (24.7 percent).
Among 106 metropolitan statistical areas with a population greater than 500,000, 14 of the 15 with the highest shares of mortgaged properties that were equity-rich in the third quarter of 2021 were in the West. The top five were Austin, TX (66.9 percent equity-rich); Boise, ID (66.7 percent); San Jose, CA (65.8 percent); Ogden, UT (62.8 percent) and Spokane, WA (62.2 percent). While Austin again led the South, the leader in the Northeast region remained Boston, MA (48.9 percent), and the top metro in the Midwest continued to be Grand Rapids, MI (44.8 percent).
The 10 metro areas with the lowest percentages of equity-rich properties in the third quarter of 2021 were in the Midwest and South, led by Jackson, MS (10.2 percent of mortgage homes were equity-rich); Baton Rouge, LA (16.2 percent); Wichita, KS (17.6 percent); Little Rock, AR (20.2 percent) and Virginia Beach, VA (21.5 percent).
The portion of mortgaged homes considered equity rich rose from the second quarter of 2021 to the third quarter of 2021 in 95 the 106 metro areas analyzed (90 percent) while all but two (98 percent improved year over year.
Top equity-rich counties still clustered in West region
Among 1,605 counties that had at least 2,500 homes with mortgages in the third quarter of 2021, 15 of the top 20 equity-rich locations were in the West region.
Counties with the highest share of equity-rich properties were Nantucket County, MA (76.6 percent equity-rich); Blaine County, ID (north of Twin Falls) (74.5 percent); Dukes County (Martha’s Vineyard), MA (74.3 percent); Valley County, ID (north of Boise) (74 percent) and Gem County, ID (outside Boise) (71.8 percent).
Counties with the smallest share were Campbell County (Gillette), WY (7.3 percent equity-rich); Geary County (Junction City), KS (7.4 percent); Madison County, MS (north of Jackson) (8.2 percent); Hoke County, NC (outside Fayetteville) (9.6 percent) and Cowley County, KS (outside Wichita) (11 percent).
At least half of all properties considered equity-rich in over 1,900 zip codes
Among 8,657 U.S. zip codes that had at least 2,000 residential properties with mortgages in the third quarter of 2021, there were 1,948 where at least half the mortgaged properties were equity-rich.
Forty-five of the top 50 were in California, Texas, Massachusetts and Idaho, with 11 of the top 20 in Austin. TX. They were led by zip codes 78746 in Austin, TX (80.5 percent of mortgaged properties were equity-rich); 94122 in San Francisco, CA (80.1 percent); 78749 in Austin, TX (79.7 percent); 94116 in San Francisco, CA (79.4 percent) and 78733 in Austin, TX (79.2 percent).
Highest seriously underwater shares still in South and Midwest
Nine of the 10 states with the highest shares of mortgages that were seriously underwater in the third quarter of 2021 were in the South and Midwest, led by Mississippi (17.7 percent seriously underwater), Wyoming (11.5 percent), Louisiana (10.7 percent), Iowa (8.4 percent) and Illinois (7.6 percent). The smallest percentages were in the West, led by Washington (1.2 percent), Utah (1.2 percent), Oregon (1.3 percent), Arizona (1.3 percent) and Nevada (1.4 percent).
Among 106 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 2021 included Jackson, MS (37.3 percent); Baton Rouge, LA (11.6 percent); Wichita, KS (8.7 percent); Scranton, PA (8.4 percent) and New Orleans, LA (8.2 percent).
Among the 106 metro areas, 93 (88 percent) showed a decrease in levels of seriously underwater properties from the second to the third quarter of 2021. Seriously underwater rates dropped, year over year, in 102 of those areas (96 percent).
More than 25 percent of residential properties seriously underwater in just 27 zip codes
Among 8,657 U.S. zip codes that had at least 2,000 homes with mortgages in the third quarter of 2021, there were only 27 locations where more than 25 percent of mortgaged properties were seriously underwater. Four of the 27 were in Cleveland, OH.
The top five zip codes with the largest shares of seriously underwater properties in the third quarter were 04330 in Augusta, ME (72.5 percent of mortgaged homes were seriously underwater); 66441 in Junction City, KS (64.9 percent); 39046 in Canton, MI (48.9 percent); 44108 in Cleveland, OH (47.7 percent) and 39401 in Hattiesburg, MI (47.4 percent).
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 Data Solutions nationwide for more than 155 million U.S. properties. The ATTOM Data Solutions Home Equity and Underwater report has been updated and modified to better reflect a housing market focused on the traditional home buying process. ATTOM Data Solutions 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.
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