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Share of Seriously Underwater Mortgages Slips Below 3%

ATTOM has released its Q2 2022 U.S. Home Equity & Underwater Report, which shows that 48.1% of mortgaged residential properties in the U.S. were considered equity-rich in Q2, meaning that the combined estimated amount of loan balances secured by those properties was no more than 50% of their estimated market values.

The portion of mortgaged homes that were equity-rich in Q2 of 2022 increased from 44.9% in Q1 of 2022 and from 34.4% in Q2 of 2021. The latest increase, to virtually half of all mortgage payers, marked the ninth straight quarterly rise in the portion of homes in equity-rich territory. The report found that at least half of all mortgage-payers in 18 states were equity-rich in Q2, compared to only three states a year earlier.

The report also shows that just 2.9% of mortgaged homes or one in 34 were considered seriously underwater in Q2 of 2022, with a combined estimated balance of loans secured by the property of at least 25% more than the property's estimated market value. That was down from 3.2% of all U.S. homes with a mortgage in the prior quarter and 4.1% or one 24 properties a year earlier.

"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 VP of Market Intelligence at ATTOM. "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."

Across the country, 49 states saw equity-rich levels increase from Q1 of 2022 to Q2 of 2022, while seriously underwater percentages dipped in 46 states. Year-over-year, equity-rich levels rose in all 50 states and seriously underwater portions dropped in 46 states.

The equity scenario continued improving in the second quarter for homeowners around the U.S., mainly because home values kept soaring. After a flat first quarter, the median single-family home price shot up another 9% quarterly and 15% annually during the Spring of this year to a new high of $346,000. For owners keeping up with mortgage payments, that meant a widening gap between what they owed and what their homes were worth, boosting more home values into equity-rich status.

In addition, down payments for recent buyers have grown from about 5% to 7% over the past couple of years, resulting in new owners starting off with more equity.

In Q2 of 2022, equity continued on a relentless upward path despite significant economic uncertainties connected to home-mortgage rates doubling this year, inflation soaring at 40-year highs, rising fuel costs and other issues. While the chances of even more improvement remain uncertain, there is little immediate sign that equity gains will flatten out, especially as home buyers keep chasing a historically tight supply of properties for sale.

Equity-rich share of mortgages rises most in the South

Seven of the 10 states where the equity-rich share of mortgaged homes increased most from Q1 to Q2 of 2022 were in the southern region of the U.S. The biggest increases were in Wyoming, where the portion of mortgaged homes considered equity-rich rose from 26.1% in Q1 to 33.9% in Q2. Maine followed, (up from 48.5% to 56.3%), succeeded by Florida (up from 53.6% to 60.4%), Mississippi (up from 23.5% to 29.1%), and South Carolina (up from 41.2% to 46.5%).

States where the equity-rich share of mortgaged homes decreased, or went up the least, from Q1 to Q2 of this year were New Jersey (down from 38.6% to 37.9%), Utah (up from 63.6% to 64.3%), Idaho (up from 68.8% to 69.5%), North Dakota (up from 28.6% to 29.5%), and West Virginia (up from 26.9% to 28.4%).

Largest declines in seriously underwater properties spread across Northeast, South and Midwest

States with the biggest decreases in the percentage of mortgaged homes considered seriously underwater from the first quarter of 2022 to the second quarter of 2022 were spread across the Northeast, South and Midwest. They were led by Mississippi (share of mortgaged homes seriously underwater down from 17% to 8.1%), Wyoming (down from 10% to 7%), Missouri (down from 6.6% to 5.2%), Maine (down from 3.1% to 2.2%), and Connecticut (down from 4% to 3.3%).

The only states where the percentage of seriously underwater homes increased from Q1 to Q2 of this year were Montana (up from 3% to 3.9%), New Jersey (up from 2.9% to 3%) and New York (up from 2.7% to 2.8%).

Top equity-rich counties located in Northeast, South and West

Among 1,624 counties that had at least 2,500 homes with mortgages in Q2 of 2022, 49 of the top 50 equity-rich locations were in the Northeast, South, and West.

Counties with the highest share of equity-rich properties were:

  • Dukes County (Martha's Vineyard), Massachusetts (83.2% equity-rich)
  • Chittenden County (Burlington), Vermont (82.3%)
  • Gillespie County, Texas (west of Austin) (79.4%)
  • Nantucket County, Massachusetts (78.6%)
  • Travis County (Austin), Texas (78.6%)

Counties with the smallest share of equity-rich homes in Q2 of 2022 were:

  • Geary County (Junction City), Kansas (7% equity rich)
  • Vernon Parish, Louisiana (northwest of Lafayette) (9.7%)
  • Cumberland County (Fayetteville), North Carolina (12%)
  • Acadia Parish, Louisiana (outside Lafayette) (13.2%)
  • Greenup County, Kentucky (14%)
At least half of all properties considered equity-rich in almost 40% of zip codes

Among 8,708 U.S. zip codes that had at least 2,000 residential properties with mortgages in Q2 of 2022, there were 3,889 (37%) where at least half the mortgaged properties were equity-rich.

Forty-eight of the top 50 were in CaliforniaFloridaMassachusetts and Texas, with five of the top 10 in Austin, Texas. They were led by zip codes 78617 in Del Valle, Texas (86.4% of mortgaged properties were equity-rich); 78739 in Austin, Texas (85.7%); 34108 in Naples, Florida (85.1%); 02539 in Edgartown, Massachusetts (85%), and 78733 in Austin, Texas (84.8%).

South and Midwest still with largest shares of seriously underwater properties

Nine of the 10 states with the highest shares of mortgages that were seriously underwater in Q2 of 2022 were in the South and Midwest. The top five were:

  1. Louisiana (11% seriously underwater)
  2. Mississippi (8.1%)
  3. Wyoming (7%)
  4. Iowa (6.8%)
  5. Illinois (6.5%)

The smallest shares were in:

  1. Vermont (1% seriously underwater)
  2. California (1%)
  3. Washington (1%)
  4. Rhode Island (1.1%)
  5. Florida (1.2%)

The portion of mortgages that were seriously underwater nationwide during Q2 of 2022 declined from Q1 of 2022 in 101 or 95%— of the 107 metro areas with enough data to analyze. Seriously underwater rates decreased year-over-year in 102 of those 107 metros.

More than 25 percent of residential properties seriously underwater in just 33 zip codes

Among 8,708 U.S. zip codes that had at least 2,000 homes with mortgages in Q2 of 2022, there were only 33 locations where more than 25% of mortgaged properties were seriously underwater. Of those, 14 were in Cleveland, OhioDetroit, Michigan and Philadelphia, Pennsylvania.

The top five zip codes with the largest shares of seriously underwater properties in Q2 of 2022 were 46408 in Gary, Indiana (47.7% of mortgaged homes were seriously underwater); 44108 in Cleveland, Ohio (46.6%); 66441 in Junction City, Kansas (44.9%); 10570 in Pleasantville, New York (44.8%), and 44112 in Cleveland, Ohio (42.9%).

More than 90 percent of homeowners facing foreclosure have at least some equity

Only about 214,800 homeowners were facing possible foreclosure in Q2 of 2022, or just four-tenths of one percent of the 58.2 million outstanding mortgages in the U.S. Of those facing foreclosure, about 195,400 (91%) had at least some equity built up in their homes.

"The fact that over 90% of homeowners in foreclosure have positive equity is good news for borrowers who find themselves in financial distress," said Sharga. "These homeowners have the opportunity to leverage this equity to either secure short-term financing to resolve their delinquencies, or to sell their properties at a profit and avoid a foreclosure auction."

States with the highest percentages of homeowners who were facing foreclosure with equity in their properties in Q2 of 2022 included:

  • New Hampshire (99% with equity)
  • Oregon (99%)
  • Utah (99%)
  • Colorado (99%)
  • Nevada (99%)

States with the lowest percentages included:

  • Louisiana (87% with equity)
  • Mississippi (89%)
  • Kansas (91%)
  • Illinois (92%)
  • Maryland (92%)

To read the full report, including more data and methodologies, click here.

 

About Author: Demetria Lester

Demetria C. Lester is a reporter for DS News and MReport, with more than six years of writing experience. She has served as Editor-in-Chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington. She has covered events such as the Byron Nelson, Pac-12 Conferences, the Women in Dallas Film Festival, to freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, she is an avid jazz lover and reader. She can be reached at [email protected]
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