Elevated mortgage rates and climbing inflation have not dampened the steady rise of homeowner equity, buoyed by soaring home values due, in part, to a historic housing supply shortage.
Forty-eight percent of mortgaged residential properties in the United States were considered equity-rich, meaning the owner has at least 50% equity, in the second quarter of 2022, according to newly released data from ATTOM, a curator of real estate data.
The proportion of equity-rich homes has continued on an upward trajectory, rising from 44.9% in the first quarter of 2022 and from 34.4% in the second quarter of 2021. Additionally, at least half of all mortgage-payers in 18 states were equity-rich in the second quarter, compared to only three states a year earlier, according to the report.
Further, just 2.9% of mortgaged homes were deemed seriously underwater, meaning the owner owed at least 25% more than the estimated market value of the property. Meanwhile, down payments for new buyers have grown from about 5 to 7% over the past several years, resulting in new owners starting off with more equity.
Key findings:
- Forty-nine states saw equity-rich levels increase from the first quarter of 2022, while seriously underwater rates dipped in 46 states.
- Seven of the 10 states where the equity-rich share of mortgaged homes increased most from the first to the second quarter of 2022 were in the southern region of the U.S. The biggest increase was in Wyoming, where the portion of equity-rich homes grew by 7.8% from the first quarter of 2022, closely followed by Maine and Florida.
- States where the equity-rich share of mortgaged homes decreased, or went up the least, from the first quarter to the second quarter were New Jersey, which was down less than one percent, Utah, Idaho, North Dakota and West Virginia.
- Mississippi led the states with the biggest decreases in the percentage of mortgaged homes considered seriously underwater from the first quarter to the second quarter with its share down 8.9%. Wyoming was down 3%, followed by Missouri, which was down 1.4%.
- Only three states saw their percentage of seriously underwater homes increase, albeit marginally, in the second quarter: Montana, up 0.9%; New Jersey, up 0.1%; and New York, also up 0.1%.
- The highest levels of equity-rich properties around the U.S. remained in the West during the second quarter, with eight of the top 10 states located in that region. The top states were Vermont, Idaho, Arizona, Utah and Washington.
- Nine of the 10 states with the highest shares of mortgages that were seriously underwater in the second quarter were in the South and Midwest.
- Of the roughly 200,000 homeowners facing possible foreclosure in the second quarter, about 91 percent had at least some equity built up in their homes.
The takeaway:
“After 124 consecutive months of home price increases, it’s no surprise that the percentage of equity-rich homes is the highest we’ve ever seen, and that the percentage of seriously underwater loans is the lowest,” said Rick Sharga, executive vice president of market intelligence at ATTOM, in a release. “While home price appreciation appears to be slowing down due to higher interest rates on mortgage loans, it seems likely that homeowners will continue to build on the record amount of equity they have for the rest of 2022.”
