The most recent edition ATTOM’s U.S. Home Equity & Underwater Report for the fourth quarter shows that nearly half of mortgaged residential properties were considered “equity-rich” meaning that the remaining balance of a mortgage was no more than 50% of their estimated market value.
In the fourth quarter, the portion of mortgaged homes that were equity-rich rose to 41.9%, up from 39.5% in the third quarter, 28.3% in the second quarter, and 30.2% year-over-year.
On the other hand, a meager amount of homes—3.1% or one in 29—had mortgages that were considered “seriously underwater.” This number was down from 3.4% in the third quarter, 4.1% in the second quarter and 5.4% from the previous year.
“Across the country, 48 states saw equity-rich levels increase from the third quarter to the fourth quarter of 2021, while seriously underwater percentages decreased in 46 states,” the report said. “Year over year, equity-rich levels rose in 49 states, including the District of Columbia, as seriously underwater portions dropped in 48 states, including the District of Columbia.”
These gains which occurred at both ends of the equity spectrum came as the housing market had the best year in a decade, even while the economy continues to recover from the COVID-19 pandemic. The market surged due to record-low interest rates and changing consumer preferences in light of the “work from home” phenomenon that became prevalent in the early days of the pandemic from buyers that wanted to escape congested viral hot-spots to more rural areas with houses and yards.
All of these occurrences also led the average home price to break the $300,000 mark last year, with most properties seeing a 10% spike in values over the year.
“Another quarter, another boost to the balance sheets of homeowners in most of the United States—that was the story from the fourth quarter of last year. As home prices kept rising, so did the equity built up in residential properties, to the point where close to half of all mortgage payers around the country found themselves in equity-rich territory,” said Todd Teta, Chief Product Officer with ATTOM. “No doubt, there are market metrics that pose warnings about how long the boom can last and equity can keep improving. We keep watching those closely. But for now, homeowners are sitting pretty as the wealth they have tucked away in their homes keeps growing.”
Among all zip codes (8,657 zip codes in all) there are 2,466 areas where at least half the mortgaged properties within their bounds were equity-rich. On the other hand, there were only 18 zip codes where more than 25 percent of mortgaged properties were seriously underwater.
“Forty-five of the top 50 continued to be in California, Texas, Massachusetts and Idaho, with 13 of the top 25 in Austin, Texas. They were led by zip codes 02539 in Edgartown, Massachusetts (82.7% of mortgaged properties were equity-rich); 78739 in Austin, Texas (82.1%); 78617 in Del Valle, Texas (81.7%); 02557 in Oak Bluffs, Massachusetts (81.6%) and 78749 in Austin, Texas (81.3%).”
Nine of the 10 states with the highest shares of mortgages that were seriously underwater in the fourth quarter of 2021 were in the South and Midwest. The top five were Wyoming (14.3% seriously underwater), Mississippi (12.2%), Louisiana (10%), Illinois (7.1%) and Iowa (7%).