Under half (44.9 percent) of mortgages in the country were considered equity-rich in the first quarter, according to ATTOM’s first-quarter 2022 U.S. Home Equity and Underwater Report. That was up from 41.9 percent in the fourth quarter and from 31.9 percent in the first quarter of 2021.
“Homeowners continue to benefit from rising home prices,” ATTOM Executive Vice President of Market Intelligence Rick Sharga said in a release. “Record levels of home equity provide financial security for millions of families and minimize the chance of another housing market crash like the one we saw in 2008. But these higher home prices and rising interest rates make it extremely challenging for first time buyers to enter the market.”
Just 3.2 percent of mortgaged homes, or one in 31, were considered seriously underwater in the first quarter, according to the ATTOM report. That was virtually the same as the fourth quarter (3.1 percent), but still under 4.7 percent a year earlier.
Across the country, 45 states saw equity-rich levels increase from the fourth quarter to the first quarter, while seriously underwater percentages increased in 28 states, by less than 1 percent in most cases. Year-over-year, equity-rich levels rose in 48 states, and seriously underwater portions dropped in 46.
The equity trends came as the housing market boom continued into early 2022, although at a slower pace. The median home price rose 2 percent to yet another record of $320,500.
While market analysts are predicting a slowdown, the most recent gains happened as homebuyers kept chasing a tight supply of properties for sale, kicking prices up even higher. Homeowner equity improved again in the first quarter as rising home prices widened gaps between what homeowners owed on their mortgages and the value of their properties.
“It’s likely that equity will continue to grow through the rest of 2022, although home price increases should moderate as the year goes on,” Sharga said. “Rising interest rates, the highest inflation in 40 years, and the ongoing supply chain disruptions due to the war in Ukraine are likely to weaken demand and slow down home price appreciation.”
The states where the equity-rich share of mortgaged homes rose most from the fourth quarter to the first quarter included New Mexico (up from 35.3 percent to 43.4 percent), Florida (up from 46.6 percent to 53.6 percent), California (up from 53.7 percent to 60.5 percent), South Carolina (up from 35 percent to 41.2 percent) and Montana (up from 40.5 percent to 45.7 percent).
States where the equity-rich share of mortgaged homes decreased from the fourth to first quarter included South Dakota (down from 36 percent to 32.3 percent), Mississippi (down from 26.3 percent to 23.5 percent), Louisiana (down from 22.5 percent to 21.6 percent), North Dakota (down from 29.3 percent to 28.6 percent) and Pennsylvania (down from 35.49 percent to 35.46 percent).
The states with the biggest increases in mortgaged homes considered seriously underwater from the fourth quarter to the first quarter were led by Mississippi (up from 12.2 percent to 17 percent), Missouri (up from 5.1 percent to 6.6 percent), Louisiana (up from 10 percent to 11.3 percent), Pennsylvania (up from 4.2 percent to 5.2 percent) and Delaware (up from 3.7 percent to 4.5 percent).
States where seriously underwater homes declined the most were Wyoming (down from 14.3 percent to 10 percent), Maine (down from 4.4 percent to 3.1 percent), Oklahoma (down from 5.5 percent to 4.8 percent), Alabama (down from 5.1 percent to 4.6 percent) and Montana (down from 3.4 percent to 3 percent).
The states with the highest levels of equity-rich properties in the first quarter were led by Idaho (68.8 percent), Vermont (68 percent), Utah (63.6 percent), Washington (60.9 percent) and Arizona (60.9 percent). Those with the lowest levels of equity-rich properties were in Louisiana (21.6 percent), Mississippi (23.5 percent), Illinois (23.5 percent), Alaska (25.2 percent) and Wyoming (26.1 percent).
The top five states with the highest shares of mortgages that were seriously underwater in the first quarter were Mississippi (17 percent), Louisiana (11.3 percent), Wyoming (10 percent), Iowa (7.4 percent) and Illinois (7.2 percent). The metro areas with the largest shares of mortgages that were seriously underwater were Baton Rouge, La. (11.3 percent), Wichita, Kan. (8.6 percent), New Orleans (8 percent), Jackson, Miss. (6.9 percent), and Youngstown, Ohio (6.8 percent).
About 201,000 homeowners were facing possible foreclosure in the first quarter, or just three-tenths of 1 percent of the 58.1 million outstanding mortgages in the country. However, 180,000, or 90 percent of those facing possible lender takeover, had at least some equity built up in their homes.
“Positive equity should give financially distressed homeowners better options than their counterparts had during the Great Recession, when 33 percent of all homeowners were underwater on their mortgages,” Sharga said. “Hopefully these borrowers will be able to tap into their equity to refinance their debt or be able to leverage it to sell their property and get a fresh start.”
States with the highest percentages of homeowners who had equity in their properties and were facing foreclosure in the first quarter included New Hampshire (99 percent with equity), Idaho (99 percent), Utah (99 percent), Washington (97 percent) and Colorado (97 percent). States with the lowest percentages included Mississippi (58 percent), Louisiana (76 percent), Maryland (80 percent), Illinois (81 percent) and Kansas (82 percent).