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Shaky Economy Hasn’t Slowed Rise in Home Equity

Of the 59 million mortgaged homes in the United States, 17.8 million or 32% 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' first-quarter 2021 U.S. Home Equity & Underwater Report.

ATTOM's Chief Product Officer Todd Teta says equity has continued to improve because price increases have widened the gap between what homeowners owe on mortgages and the value of their properties.

“It continues to be a great time to be a homeowner most everywhere in the country. The ongoing price spikes we’re seeing help to cut down the number of seriously underwater properties and boost the level of equity-rich properties,” Teta said. “However, that may shift once the foreclosure moratorium is lifted and that’s something we’re watching, partly because it could limit equity gains and draw people underwater. For now, though, the equity picture remains one of many signs that the long U.S. housing market boom keeps charging ahead.”

The number of equity-rich homes is up from the fourth quarter of 2020 by 28.3% and up 26.5% from Q1 last year. Reports ATTOM, it's "one of many measures showing how the U.S. housing market continues fending off economic damage caused by the worldwide coronavirus pandemic."

ATTOM's report showed 2.6 million or one in 21 (4.7% of) mortgaged homes were considered seriously underwater during this April to April reporting period. (Seriously underwater means a combined estimated balance of loans secured by the property at least 25% more than the property’s estimated market value).

The number represents a decrease in seriously underwater homes for the year, down from 5.4% in the prior quarter, 6% in the third quarter of 2020, and 6.6% a year ago.

While the data indicates overall positivity where home equity is concerned, homeowners who are underwater face an increased risk of foreclosure, especially considering the COVID-ravaged economy and employment situation.

As ATTOM's RealtyTrac EVP Rick Sharga said after ATTOM's 2020 Q4 report: "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."

The report, which can be accessed in full at ATTOM.com breaks down home equity regionally. Western and northeastern states show the biggest improvement in the equity-rich share of homes, the largest declines in underwater properties were observed across Midwest and South, and the Northeast and West continue to have the largest shares of equity-rich homes.

About Author: Christina Hughes Babb

Christina Hughes Babb is a reporter for DS News and MReport. A graduate of Southern Methodist University, she has been a reporter, editor, and publisher in the Dallas area for more than 15 years. During her 10 years at Advocate Media and Dallas Magazine, she published thousands of articles covering local politics, real estate, development, crime, the arts, entertainment, and human interest, among other topics. She has won two national Mayborn School of Journalism Ten Spurs awards for nonfiction, and has penned pieces for Texas Monthly, Salon.com, Dallas Observer, Edible, and the Dallas Morning News, among others. Contact Christina at [email protected].

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