The amount of equity-rich homes decreased slightly from 48% in Q4 2022 to 47.2% in Q1 2023, marked the second straight quarterly decline, according to a new report from ATTOM.
ATTOM’s Home Equity & Underwater Report for Q1 2023 found that 3% of mortgaged homes, or one in 33, were considered seriously underwater, virtually unchanged from 2.9% last quarter, and down from 3.2% last year.
“The equity downturn, small as it was, stood as the latest indicator of how a decline in home prices across much of the country has started to affect homeowners following a decade-long market boom. It comes as home-seller profits have slid to their lowest point in two years,” said the author of the report.
Key highlights:
- The portion of equity-rich mortgages continued to decrease in a majority of states, commonly by less than two percentage points. The biggest drops again came in the West, which followed a pattern that began late last year. The declines were led by Arizona (from 59.9%to 56.4%), Nevada (from 52.3% to 49%), Idaho (from 61.6% to 58.5%), Utah (from 60.3% to 58.1%) and Washington (from 58.5% to 56.5%).
- At the other end of the spectrum, the South had four of the five states where the equity-rich share of mortgaged homes increased the most. The largest increases were in New Mexico (from 45.6% to 48.9%), Kentucky (from 37.2% to 40.2%), Mississippi (from 33.2% to 35%), Oklahoma (from 35.2% to 36.4%) and South Carolina (from 48.9% to 49.7%).
- The portion of mortgaged homes considered seriously underwater remained largely unchanged—and historically low—in most of the nation, with the biggest increases clustered in the Northeast. States leading those increases included South Dakota (from 4.3% to 4.8%), Pennsylvania (from 4.4% to 4.7%), Maine (from 2.2% to 2.5%), Vermont (from 0.9% to 1.1%) and Idaho (from 2.2% to 2.4%).
- The percentage of seriously underwater homes decreased the most in Mississippi (from 6.8% to 5.6%), Missouri (from 7.1% to 6.4%), Kansas (from 4.3% to 3.7%), Louisiana (from 10.6% to 10.4%) and New Mexico (from 3% to 2.9%).
- Despite seeing some of the largest decreases in equity-rich percentages, the West still had the highest levels of such properties, with seven of the top 10 states. Those with the highest portions were Vermont (75.9%), Florida (61%), California (59.7%), Idaho (58.5%) and Montana (58.4%).
- Nine of the 10 states with the lowest percentages of equity-rich properties were in the Midwest and South. The smallest portions were in Louisiana (24.1%), Illinois (26.4%), Alaska (27.4%), West Virginia (29.9%) and North Dakota (30.9%).
- Among 1,630 counties that had at least 2,500 homes with mortgages, 20 of the top 25 equity-rich locations were in the Northeast and West regions.
- Counties with the highest share of equity-rich properties were Chittenden County, Vermont (86.6%); Dukes County, Massachusetts (83.1%); Nantucket County, Massachusetts (79.1%); Addison County, Vermont (77.3%) and San Miguel County, Colorado (77.1%).
- Counties with the smallest share of equity-rich homes in the first quarter of 2023 were Vernon Parish, Louisiana (10.5%); Greenup County, Kentucky (11.8%); Iberville Parish, Louisiana (12.4%); Beauregard Parish, Louisiana (12.5%) and Geary County, Kansas (14%).
- The Midwest and South again had the top 10 states with the highest shares of mortgages that were seriously underwater. The top five were Louisiana (10.4%), Missouri (6.4%), Illinois (6.4%), Iowa (6.3%) and Kentucky (6.1%).
- The smallest shares were in Vermont (1.1%), Rhode Island (1.1%), Florida (1.2%), New Hampshire (1.3%) and California (1.4%).
Major takeaway:
“Homeowners across the U.S. continue to sit in a far better position than they were just a few years ago, with historically elevated levels of wealth built up in their properties. However, the recent downturn in the housing market is chipping away at the bounty they reaped from a decade of price surges,” said Rob Barber, chief executive officer for ATTOM.
The report found that only about 238,000 homeowners were facing possible foreclosure in Q1 2023, or just four-tenths of 1% of the 58.2 million outstanding mortgages. Of those facing foreclosure, about 219,000, or 92%, had at least some equity built up in their homes.
“Home equity has fallen modestly amid a larger slump in profits homeowners are getting when they sell. It’s still too early to call this a long-term trend, and there are reasons to hope for a market turnaround this year. For now, though, various measures suggest that the best of the boom may be behind us,” added Barber.
States where the largest portion of homeowners facing possible foreclosure had equity in their properties included Utah (98%), Nevada (96%), Texas (95%), Florida (95%) and North Carolina (95%). On the other hand, states with the lowest percentages included Louisiana (82%), Maryland (87%), Iowa (87%), Virginia (88%) and Ohio (88%).
For the full report, with additional data on the largest metro areas and zip codes, click here.
