ATTOM has released its fourth-quarter 2022 U.S. Home Equity & Underwater Report, which shows that 48 percent of mortgaged residential properties in the United States were considered equity-rich in the fourth quarter, meaning that the combined estimated amount of loan balances secured by those properties was no more than 50 percent of their estimated market values.
The portion of mortgaged homes that was equity-rich in the fourth quarter of 2022 declined slightly from 48.5 percent in the third quarter of 2022, but was still up from 41.9 percent in the fourth quarter of 2021. While the equity-rich levels nationwide remain nearly double what it was three years ago, the drop-off in the last three months of 2022 reversed a string of 10 straight quarterly gains. The report found that the portion of equity-rich mortgage-payers went down from the third to the fourth quarter of 2022 in 31 states around the U.S.
The dip marked one of the first signs of how a recent fall in home prices across the country has started to affect homeowners following a decade-long market boom.
Despite the new pattern in equity-rich mortgages, however, the report also shows that just 2.9 percent of mortgaged homes, or one in 34, were considered seriously underwater in the fourth quarter of 2022. That meant that they had a combined estimated balance of loans secured by the property of at least 25 percent more than the property’s estimated market value. The latest seriously underwater figure was unchanged from 2.9 percent in the prior quarter, and was still down from 3.1 percent, or one in 32 properties, in the fourth quarter of 2021.
Overall, 94.1 percent of homeowners paying off mortgages had at least some equity built up in their properties during the fourth quarter of last year. That also represented a slight decrease from 94.3 in the prior quarter, while still up from 93.5 percent a year earlier and 88.8 percent in late 2020. The portion of homeowners with equity rises further when accounting for homeowners who have paid off their home loans.
“Dents are beginning to surface in the armor around the U.S. housing market after 11 years of a strong showing for owners,” said Rob Barber, CEO for ATTOM. “Home values have been dropping since the middle of last year, which appears to be starting to cut into homeowner equity around the country. That’s probably happening because values are sinking faster than owners are paying off their mortgages. How that shakes out over the next few months will depend on a lot of factors, including where interest rates go. But for now, it looks like the runup in wealth flowing from owning homes has stalled along with the market.”
Largest decline in equity-rich share of mortgages spread across West
The portion of equity-rich mortgages changed mostly by small amounts in different states from the third to the fourth quarter of 2022 – commonly by less than two percentage points. But the biggest drops were all in the West, following earlier quarters that saw larger gains in that region than elsewhere in the country. The fourth-quarter declines were led by Idaho (portion of mortgages homes considered equity-rich decreased from 65.8 percent in the third quarter of 2022 to 61.6 percent in the fourth quarter of 2022), Arizona (down from 63.4 percent to 59.9 percent), Nevada (down from 55.8 percent to 52.3 percent), Washington (down from 61 percent to 58.5 percent) and Oregon (down from 55 percent to 53.2 percent).
At the other end of the spectrum, the South had five of the top 10 states where the equity-rich share of mortgaged homes increased the most from the third quarter to the fourth quarter of 2022. The largest increases were in Montana (up from 51.5 percent to 58 percent), Kansas (up from 34 percent to 37 percent), Delaware (up from 34.2 percent to 35.9 percent), Mississippi (up from 31.5 percent to 33.2 percent) and Arkansas (up from 36.6 percent to 38 percent).
Small increases in seriously underwater mortgages clustered in West
While the portion of mortgage homes considered seriously underwater remained historically low in the fourth quarter of 2022 in most of the nation, the largest increases were clustered in the West. The top increases were in Missouri (share of mortgaged homes that were seriously underwater up from 5.2 percent in the third quarter of 2022 to 7.1 percent in the fourth quarter), Hawaii (up from 1.5 percent to 2 percent), Idaho (up from 1.9 percent to 2.2 percent), New Mexico (up from 2.7 percent to 3 percent) and Wyoming (up from 2.9 percent to 3.2 percent).
States where the percentage of seriously underwater homes decreased the most from the third quarter to the fourth quarter of last year were Mississippi (down from 9 percent to 6.8 percent), Delaware (down from 3.9 percent to 3 percent), Montana (down from 3 percent to 2.2 percent), Kansas (down from 4.9 percent to 4.3 percent) and Arkansas (down from 5.6 percent to 5.2 percent).