Property data curator ATTOM released its third-quarter 2023 U.S. Home Equity & Underwater Report, which shows that 47.4 percent of mortgaged residential properties were considered equity-rich in the third quarter, meaning that the combined estimated amount of loan balances secured by those properties was no more than half of their estimated market values.
The portion of mortgaged homes considered equity-rich in the third quarter decreased from 49.2 percent in the second quarter– the largest quarterly decline since at least 2019. The latest figure also was down from 48.5 percent in the third quarter of 2022. Those declines happened despite home values rebounding recently from a fallback that had lasted from the middle of last year to the early part of this year.
But while equity-rich levels dropped in the third quarter, the report also showed that the portion of mortgaged homes that were seriously underwater in the U.S. continued to improve.
“By all measures, homeowner equity around the country remained strong during the third quarter as millions of households kept benefiting from the nation’s extended runup in home values. At the same, though, we saw an unusual downturn at the equity-rich end of the spectrum,” ATTOM CEO Rob Barber said in a release. “That could have just been a temporary blip. It also could have reflected an increase in long-time owners who had lots of equity built up selling their homes, or perhaps borrowing against their rising wealth and slipping out of equity rich territory. The fourth quarter data should say more about whether residential equity in the U.S. has indeed topped out.”
Just 2.5 percent of all residential mortgages, or one in 40, were considered seriously underwater in the third quarter. That meant 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 seriously underwater level dropped from one in 36 homes in the second quarter and from one in 35 in the third quarter of 2022, to the lowest point in at least four years.
The mixed equity patterns came as the U.S. housing market continued recovering from the downturn that had threatened to end the decade-long run of price and equity growth.
Median single-family home prices rose 11 percent over the second and third quarters of this year following an 8 percent drop from mid-2022 to early 2023. Values went back up as the job market remained strong, with the national unemployment rate below 4 percent, and consumer-price inflation was down to less than half the level of a year earlier. A strong investment market also put more money in the hands of potential buyers, ATTOM said.
Potential for more uneven equity trends remains in place as mortgage rates rise toward 8 percent for a 30-year loan and the housing market heads into its annual slow season, which usually leads to smaller price increases or even small declines.