Almost half (48.5 percent) of mortgaged residential properties in the U.S. were considered equity-rich in the third quarter, according to ATTOM’s third-quarter U.S. Home Equity & Underwater Report. That’s up from both the second quarter (48.1 percent) and year-over-year (39.5 percent.)
At least half of all mortgage-payers in 20 states were equity-rich in the third quarter, compared to only seven states a year earlier, the report found.
“Even though home price appreciation has slowed down dramatically in recent months, homeowners have continued to build equity,” ATTOM Executive Vice President of Market Intelligence Rick Sharga said in a release. “And it appears that many of those homeowners have decided to stay where they are rather than purchase a new home, and are beginning to tap into that equity, as the number of home equity lines of credit (HELOCs) issued in the second quarter of 2022 rose by 43 percent from the prior year.”
The report also shows that just 2.9 percent of mortgaged homes were considered seriously underwater in the third quarter. That’s the same as in the second quarter but down from 3.4 percent year-over-year.
Overall, 94.3 homeowners paying off mortgages had at least some equity built up in the third quarter of this year, compared with 92.9 percent a year earlier and 87.7 percent in the third quarter of 2020.
ATTOM reported 39 states saw equity-rich levels increase from the second to third quarter, while seriously underwater percentages dipped in 38 states. Year-over-year, equity-rich levels rose in all 50 states and seriously underwater portions dropped in 43 states.
The states where the equity-rich share of mortgaged homes increased most from the second to third quarter were led by South Dakota, up from 36.7 percent in the second quarter to 41.8 percent in the third quarter. It was followed by Vermont (up from 71.4 percent to 75.9 percent), Montana (up from 48.1 percent to 51.5 percent), Indiana (up from 43 percent to 46.2 percent), and Mississippi (up from 29.1 percent to 31.5 percent).
The states where the equity-rich share of mortgaged homes decreased the most from the second to third quarter were Idaho (down from 69.5 percent to 65.8 percent), California (down from 63.1 percent to 60.6 percent), Utah (down from 64.3 percent to 62 percent), Washington (down from 63.2 percent to 61 percent) and Arizona (down from 64.8 percent to 63.4 percent).
States with the biggest decreases in the percentage of mortgaged homes considered seriously underwater were Wyoming (down from 7 percent to 2.9 percent), Montana (down from 3.9 percent to 3 percent), Kansas (down from 5.7 percent to 4.9 percent), Indiana (down from 3.8 percent to 3.1 percent) and Connecticut (down from 3.3 percent to 2.8 percent).
States where the percentage of seriously underwater homes increased the most were Mississippi (up from 8.1 percent to 9 percent), California (up from 1 percent to 1.4 percent), Idaho (up from 1.6 percent to 1.9 percent), Hawaii (up from 1.3 percent to 1.5 percent) and Washington (up from 1 percent to 1.2 percent).
The highest levels of equity-rich properties were found in Vermont (75.9 percent of mortgaged homes were equity-rich), Idaho (65.8 percent), Arizona (63.4 percent), Florida (62.8 percent) and Utah (62 percent). The smallest portions were in Louisiana (24.5 percent), Illinois (26.3 percent), Alaska (26.7 percent), West Virginia (29.3 percent) and North Dakota (30.9 percent).
The states with the highest shares of mortgages that were seriously underwater in the third quarter were Louisiana (10.8 percent seriously underwater), Mississippi (9 percent), Iowa (6.5 percent), Illinois (6.2 percent) and Kentucky (6 percent). The smallest shares were in Vermont (0.9 percent), Rhode Island (1.1 percent), Florida (1.2 percent), Washington (1.2 percent) and New Hampshire (1.2 percent).
About 227,100 homeowners were facing possible foreclosure in the third quarter, or just four-tenths of 1 percent of the 58.1 million outstanding mortgages in the country. Of those facing foreclosure, about 208,700, or 92 percent, had at least some equity built up in their homes.
“One of the reasons we don’t believe there will be another huge wave of foreclosures is that the overwhelming majority of financially-distressed homeowners do have positive equity,” Sharga said. “If these borrowers can’t leverage the equity to refinance their current mortgage, they at least have the option of selling the property rather than losing their equity to a foreclosure auction. This option wasn’t available to distressed borrowers during the Great Recession, when many borrowers were underwater on their loans.”
States where the largest portion of homeowners facing possible foreclose had equity in their properties in the third quarter included Utah (98 percent with equity), Washington (97 percent), Colorado (97 percent), Nevada (97 percent) and Arizona (97 percent). States with the lowest percentages included Mississippi (75 percent), Louisiana (80 percent), Illinois (85 percent), Maryland (85 percent) and Missouri (87 percent).