Damaged Economy Hasn’t Slowed Rise in Home Equity

Of the 59 million mortgaged homes in the United States, 17.8 million are considered equity-rich, meaning that the combined estimated amount of loans secured by those properties was less than 50% of their estimated market value, according to ATTOM Data Solutions' fourth-quarter 2020 U.S. Home Equity & Underwater Report.

Nationwide, equity-rich properties in Q4 2020 numbered about one in three, or, 30.2%, which is a 28.3% increase from Q3 and a 26.7% increase since Q4 of 2019. That is "despite the economic damage caused this year by the worldwide Coronavirus pandemic," the report's authors noted.

ATTOM's report reveals one in 18, mortgaged homes (3.2 million) are considered "seriously underwater, which means a combined estimated balance of loans secured by the property totals at least 25% more than the property’s estimated market value.

The figure represents 5.4% of all U.S. properties with a mortgage, down from 6% in the prior quarter, 6.2% in the second quarter of 2020, and 6.4% one year ago.

As the pandemic has caused other sectors to suffer, the housing market has remained strong, ATTOM reports, adding that the national median home price in 2020 soared 13%.

ATTOM's Chief Product Officer Todd Teta says market gains resulted from a "bubble of buyers" who essentially escaped the pandemic’s financial damage aiming to take advantage of super-low interest rates and, in many cases, "escape congested, virus-prone urban areas," he said.

"When it came to homeowner equity in the United States, the fourth quarter was more of the same as the third, which was more of the same as the second: a scenario that has continued to improve. The housing market kept booming despite damage caused by the virus pandemic to the broader economy – a surge that continued to boost the equity that most property owners have in their homes,” Teta said. “As with many other housing-market metrics, the prospects for equity building even further in 2021 are wholly uncertain because of many questions surrounding the pandemic and the U.S. economy. But for now, homeowners are sitting pretty on a growing reserve of personal wealth.”

ATTOM's report broke down equity-rich shares of homes by region, revealing some of the following trends:

• The western states showed the biggest improvement in the equity-rich share of homes
• The largest declines in underwater properties spread across the South
• The Northeast and West continue to have the largest shares of equity-rich homes
• The Midwest and South have the smallest
• The San Francisco area dominates the list of top equity-rich counties
• The South and Midwest continue to have highest seriously underwater shares

"The good news is that fewer and fewer homeowners across the country are underwater on their loans,” said Rick Sharga, EVP of RealtyTrac, an ATTOM Data Solutions company. “But for those homeowners who are, the uncertainty of the economy during the pandemic looms large. The dual-trigger effect of losing a job and being underwater on a mortgage often, unfortunately, leads to foreclosure."

Read ATTOM's entire home equity findings for Q4 2020 at ATTOM.com.