Equity Improves for U.S. Homeowners

CHARLOTTE, N.C. – ATTOM has released its second-quarter 2023 U.S. Home Equity and Underwater Report, which shows that 49% of mortgaged residential properties in the United States were considered equity-rich in the second 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 were equity-rich in the second quarter of 2023 increased from 47% in the first quarter of 2023, to the highest point in at least four years. With home prices rebounding across the U.S., the report found that the level of equity-rich mortgage-payers went up from the first quarter of 2023 to the second quarter of 2023 in 45 of the nation’s 50 states.

The gains followed two straight quarterly drop-offs caused by a temporary slowdown in the U.S. housing market that had threatened to end a decade-long run of price and equity growth. The second-quarter upturn marked another sign of how the market shift has helped homeowners, as home-seller profits also spiked.

While equity-rich levels rose in the second quarter, the report also shows that less than 3% of mortgaged homes in the U.S., or one in 36, were considered seriously underwater in the second quarter of 2023. That meant they had a combined estimated balance of loans secured by the property of at least 25% more than the property's estimated market value.

Just 2.8% of mortgaged homes were seriously underwater in the second quarter of this year, also the lowest point since at least 2019. The latest figure was down from 3% in the prior quarter and 2.9% in the second quarter of 2022.

“The second-quarter market revival bestowed immediate benefits on homeowners around the nation in the form of better profits for sellers and rising equity for those staying put,” said Rob Barber, CEO for ATTOM. “Equity levels were high even during the recent downturn, and now they are going back up and better than ever. It is well worth noting that the market remains in flux and the recent improvement could easily be temporary. Lots of changing forces are at work affecting whether boom times are really back, especially amid a recent increase in mortgage rates. But with the 2023 peak buying season still underway, it seems that homeowners can reasonably expect their household balance sheets to grow a bit more in the near future.”

Equity for U.S. homeowners improved in the second quarter as prices for single-family homes and condos nationwide rose throughout most of the country, reversing a market slowdown that had run from the middle of last year to the early part of this year.

Nationwide, the median home value shot up 10% in the second quarter to yet another all-time high of $350,000, after dropping 7 % over the prior three quarters.

The rebound came amid multiple factors that combined to put more financial resources in the hands of house hunters during a time of rising demand and tight housing inventory.

Home mortgage rates were down by one-half to three-quarters of a point for a 30-year fixed loan during the second quarter, after more than doubling in 2022 to about 7%. At the same time, consumer price inflation dipped down under 4%, the stock market improved after a year of ups and downs, and unemployment remained less than 4%. That happened as the peak annual buying season revved up during a time when the supply of homes for sales around the U.S. remained historically low.

With several months to go in the 2023 home-buying season, the potential for more gains remains in place. But that will depend heavily on whether key market drivers continue to improve or decline.

Largest increases in equity-rich share of mortgages spread across Midwest

The portion of mortgages that were equity-rich grew in most states around the U.S. from the first quarter of 2023 to the second quarter of 2023, commonly by up to four percentage points. The biggest gains came in the Midwest region, led by Wisconsin (portion of mortgages homes considered equity-rich rose from 41.6% in the first quarter of 2023 to 47.1% in the second quarter of 2023), Michigan (up from 42.5% to 47.7%), South Dakota (up from 41.4% to 46.4%), Ohio (up from 36.7% to 41.3%) and New Jersey (up from 38.9% to 43%).

At the other end of the scale, the South and West regions had the only states where the equity-rich share of mortgaged homes decreased from the first quarter to the second quarter of this year. They were Nevada (down from 49% to 46.8%), Louisiana (down from 24.1% to 23%), Arizona (down from 56.4% to 55.3%), Florida (down from 61% to 60.4%) and Utah (down from 58.1% to 57.8%).

Highest levels of equity-rich homeowners still in the West

The West continued to have the highest levels of equity-rich mortgaged properties around the U.S., with six of the top 10 states in the second quarter of 2023. Those with the highest portions were Vermont (77.5% of mortgaged homes were equity-rich), California (63.3%), Montana (60.9%), Florida (60.4%) and Idaho (59.4%).

Nine of the 10 states with the lowest percentages of equity-rich properties in the second quarter of 2023 were in the Midwest and South. The smallest portions were in Louisiana (23% of mortgaged homes were equity-rich), Alaska (29.2%), Illinois (29.5%), West Virginia (30%) and North Dakota (31.3%).

Most homeowners facing foreclosure have at least some equity

Only about 255,700 homeowners were facing possible foreclosure in the second quarter of 2023, or about one in every 250 mortgaged residential properties in the U.S. Of those facing foreclosure, about 235,500, or 92%, had at least some equity built up in their homes.

States where the largest portion of homeowners facing possible foreclosure had equity in their properties in the second quarter of 2023, included Utah (97% with equity), North Carolina (96%), Florida (96%), Idaho (96%) and New Hampshire (95%).

States with the lowest percentages included Louisiana (82% with equity), Illinois (85%), North Dakota (85%), Maryland (86%) and Arkansas (87%).

Copyright © 2023 BridgeTower Media; and Copyright © 2023, The Mecklenburg Times (Charlotte, NC). All rights reserved.