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Equity-rich homes outnumber underwater homes 7-to-1

Homeowners continued to see substantial home value and equity growth in the first quarter of 2021 as the real estate market remains pandemic-resistant, with equity-rich homes outnumbering “seriously underwater” ones by seven to one, according to a new report.

ATTOM Data Solutions’ Q1 2021 U.S. Home Equity & Underwater Report shows that 17.8 million residential properties in the United States were considered equity rich, meaning that the combined estimated amount of loans secured by those properties was 50% or less of their estimated market value.

The count of equity-rich properties in the first quarter of 2021 represented 31.9%, or about one in three, of the 55.8 million mortgaged homes in the United States. That was up from 30.2% in the fourth quarter of 2020, 28.3% in the third quarter and 26.5% in the first quarter of 2020 – one of many measures showing how the U.S. housing market continues fending off economic damage caused by the worldwide pandemic.

The report also shows that just 2.6 million (one in 21) mortgaged homes in the first quarter of 2021 were considered seriously underwater, with a combined estimated balance of loans secured by the property at least 25% more than the property’s estimated market value. That figure represented 4.7% of all U.S. properties with a mortgage, down from 5.4% in the prior quarter, 6% in the third quarter of 2020 and 6.6% a year ago.

Among the 50 states, 41 showed an increase from the fourth quarter of 2020 to the first quarter of 2021 in the percentage of homes considered equity rich, while 49 saw a decrease in the percentage that were seriously underwater.

The improvement at both ends of the equity scale continued across the nation despite the fallout from the pandemic. Gains came as median home prices nationwide rose 16% year over year in the first quarter of 2021, and were up at least 10% in most of the country.

As the nine-year U.S. housing market boom has surged ahead, equity has continued to improve because price increases have widened the gap between what homeowners owe on mortgages and the value of their properties. Prices have kept rising over the past year as rock-bottom interest rates and a desire to escape virus-prone areas have led to a bubble of home buyers largely untainted by the pandemic’s financial damage. Those buyers have been chasing a declining supply of properties for sale, resulting in soaring values.

“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,” said Todd Teta, chief product officer with ATTOM Data Solutions. “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.”

Western and northeastern states show biggest improvement in equity-rich share of homes

Nine of the 10 states with the biggest gains in the share of equity-rich homes from the fourth quarter of 2020 to the first quarter of 2021 were in the West or Northeast. States where the portion of mortgaged homes considered equity rich rose most were Idaho (up from 42.7% in the fourth quarter of 2020 to 50.6% in the first quarter of 2021), Utah (up from 37.9% to 42.5%), Colorado (up from 36.5% to 40.6%), Vermont (up from 47.8% to 51.5%) and Washington (up from 41% to 44.5%).

Largest declines in underwater properties across Midwest and South

Nine of the 10 states with the biggest declines in the percentage of mortgaged homes considered seriously underwater from the fourth quarter of 2020 to the first quarter of 2021 were in the South and Midwest. They were led by Iowa (share of homes seriously underwater down from 11.3% to 8.7%), Mississippi (down from 11.4% to 9.1%), Louisiana (down from 14.9% to 13%), South Dakota (down from 8.2% to 6.3%) and Nebraska (down from 7.3% to 5.5%).

States where the percentage of seriously underwater homes rose, or dropped by the smallest amounts, from the fourth quarter to the first quarter were Pennsylvania (up from 7.1% to 7.3%), Oklahoma (down from 8.3% to 8.2%), Washington (down from 2.2% to 2.1%), Illinois (down from 10.6% to 10.4%) and Minnesota (down from 4.2% to 3.9%).

Northeast and West continue to have largest shares of equity-rich homes

The Northeast and West again had far higher levels of equity-rich properties than other regions. The top 11 states with the highest levels in the first quarter of 2021 were led by Vermont, (51.5% of mortgage properties were equity rich), Idaho (50.6%), California (49%), Washington (44.5%) and Utah (42.5%).

The 10 states with the lowest percentage of equity-rich properties in the first quarter of 2021 were in the Midwest and South, led by Louisiana (15.7%), Illinois (16.8%), Oklahoma (18%), West Virginia (19.5%) and Alabama (20.3%).

Among 106 metropolitan statistical areas with a population greater than 500,000, the 10 with the highest shares of equity-rich properties again were in the West during the first quarter of 2021. They were led by San Jose, California (67.4% of mortgaged properties were equity rich); San Francisco, California (60.8%); Boise, Idaho (53.8%); Los Angeles, California (53.6%) and San Diego, California (49.3%). The leader in the Northeast region again was Boston, Massachusetts (41%), while Grand Rapids, Michigan, continued to top the Midwest (33.1%) and Dallas, Texas, led the South (43.4%).

Metro areas with the lowest%age of equity-rich properties in the first quarter of 2021 continued to be Baton Rouge, Louisiana (12.7% equity rich); Columbia, South Carolina (14.2%); Akron, Ohio (16.3%); Tulsa, Oklahoma (16.6%) and Little Rock, Arkansas (16.8%).

Among the 106 metro areas analyzed, 86 (81%) showed an increase in levels of equity-rich properties from the fourth quarter of 2020 to the first quarter of 2021; while 20 (19%) showed a decrease.

San Francisco area dominates list of top equity-rich counties

Among 1,261 counties that had at least 2,500 properties with mortgages in the first quarter of 2021, 18 of the top 20 equity-rich locations were in the West. The highest concentration again was in the San Francisco Bay area of California.

Counties with the highest share of equity-rich properties were San Mateo County, California (outside San Francisco) (70.9% or mortgage homes were equity rich); Washington County, Wisconsin (outside Milwaukee) (70.3%); Santa Clara County (San Jose), California (68.3%); Monterey County, California (outside San Francisco) (64.5%) and San Francisco County, California (64%)

Counties with the smallest share were Cumberland County (Fayetteville), North Carolina (7.6%); Brown County, Ohio (outside Cincinnati) (7.7%); Hoke County, North Carolina (outside Fayetteville) (8.6%); Vernon Parish, Louisiana (west of Alexandria) (8.6%) and Iberville Parish, Louisiana (outside Baton Rouge) (9.7%).

At least half of mortgaged properties were equity rich in 653 zip codes

Among 5,438 U.S. zip codes that had at least 2,000 properties with mortgages in the first quarter of 2021, there were 653 where at least half of all properties with a mortgage were equity rich.

Forty-six of the top 50 were in California, mostly in the San Francisco Bay area. They were led by zip codes 94024 in Los Altos, California (81.8% equity rich); 94301 in Palo Alto, California (80.2%); 94306 in Palo Alto, California (80.1%); 94707 in Berkeley, California (78.9%) and 94022 in Los Altos, California (78.7%).

South and Midwest continue to have highest seriously underwater shares

The top 10 states with the highest shares of mortgages that were seriously underwater in the first quarter of 2021 were all in the South and Midwest, led by Louisiana (13% seriously underwater), West Virginia (10.5%), Illinois (10.4%), Arkansas (9.2%) and Mississippi (9.1%). The smallest%ages again were in Oregon (1.8%), California (1.9%), Arizona (2%), Washington (2.1%) and Utah (2.1%).  

Among 106 metropolitan statistical areas with a population greater than 500,000, those with the highest share of mortgages that were seriously underwater in the first quarter of 2021 were Baton Rouge, Louisiana (13.2%); Toledo, Ohio (10.8%); Akron, Ohio (10.5%); New Orleans, Louisiana (10.2%) and Youngstown, Ohio (10%).

Among the 106 metro areas, just 6 (6%) showed an increase in levels of seriously underwater properties from the fourth quarter of 2020 to the first quarter of 2021; while 100 (94%) showed a decrease.

At least 25% of mortgaged properties were seriously underwater in 41 zip codes

Among 5,438 U.S. zip codes that had at least 2,000 properties with mortgages in the first quarter of 2021, there were 39 zip codes where at least a quarter of all properties with a mortgage were seriously underwater. The largest number of those zip codes were in Cleveland, Ohio; Akron, Ohio, and St. Louis, Missouri.

The top five zip codes with the highest shares of seriously underwater properties were 95969 in Paradise, California (80.2% or mortgaged homes were seriously underwater); 44105 in Cleveland, Ohio (52.4%); 44110 in Cleveland, Ohio (51.9%); 44112 in Cleveland, Ohio (47.7%) and 63137 in St. Louis, Missouri (45.5%).

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