Equity-Rich Properties Now Outnumber Those Seriously Underwater by Six-to-One Ratio; Portion of U.S. Homes Considered Equity-Rich Reaches 30 Percent; Seriously Underwater Properties Down to 5 Percent
ATTOM Data Solutions, curator of the nation’s premier property database, today released its fourth-quarter 2020 U.S. Home Equity & Underwater Report, which 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 percent or less of their estimated market value.
The count of equity-rich properties in the fourth quarter of 2020 represented 30.2 percent, or about one in three, of the 59 million mortgaged homes in the United States. That was up from 28.3 percent in the third quarter of 2020, 27.5 percent in the second quarter and 26.7 percent in the fourth quarter of 2019, despite the ongoing economic damage caused by the worldwide Coronavirus pandemic.
The report also shows that 3.2 million, or one in 18, mortgaged homes in the fourth quarter of 2020 were considered seriously underwater, with a combined estimated balance of loans secured by the property at least 25 percent more than the property’s estimated market value. That figure represented 5.4 percent of all U.S. properties with a mortgage, down from 6 percent in the prior quarter, 6.2 percent in the second quarter of 2020 and 6.4 percent a year ago.
The continued home-equity improvement during the fourth quarter came as the U.S. housing market closed out one of its best years in the past decade, with the national median home price soaring 13 percent. Values spiked and the nation’s nine-year housing market boom surged ahead even as the Coronavirus pandemic idled or slowed major sectors of the American economy, throwing millions of people out of work. Market gains resulted from a bubble of buyers who largely escaped the pandemic’s financial damage looking to take advantage of super-low interest rates and, in many cases, escape congested, virus-prone urban areas.
“When it came to homeowner equity in the United States, the fourth quarter was more of the same as the third, which was more of the same as the second: a scenario that has continued to improve. The housing market kept booming despite damage caused by the virus pandemic to the broader economy – a surge that continued to boost the equity that most property owners have in their homes,” said Todd Teta, chief product officer with ATTOM Data Solutions. “As with many other housing-market metrics, the prospects for equity building even further in 2021 are wholly uncertain because of many questions surrounding the pandemic and the U.S. economy. But for now, homeowners are sitting pretty on a growing reserve of personal wealth.”
Western states show biggest improvement in equity-rich share of homes
Six of the 10 states with the biggest gains in the share of equity-rich homes from the third quarter to the fourth quarter of 2020 were in the West. The top five were California, where the portion of mortgaged homes considered equity-rich rose from 39.7 percent in the third quarter of 2020 to 46.1 percent in the fourth quarter, Idaho (up from 39.5 percent to 42.7 percent), Montana (up from 31.9 percent to 34.8 percent), Arizona (up from 29.4 percent to 32.3 percent) and Vermont (up from 45.1 percent to 47.8 percent).
States where the share of equity-rich homes decreased or went up by the smallest amounts from the third to the fourth quarters of 2020 were Nebraska (down from 23 percent to 22.4 percent), South Dakota (up from 30.3 percent to 30.4 percent), North Dakota (up from 24.7 percent to 24.8 percent), Massachusetts (up from 35.7 percent to 35.9 percent) and Iowa (up from 21.8 percent to 22.1 percent).
Largest declines in underwater properties spread across South
Five of the 10 states with the biggest declines from the third quarter of 2020 to the fourth quarter of 2020 in the percentage of homes considered seriously underwater were in the South. They were led by West Virginia, (share of homes seriously underwater down from 13.8 percent to 11.4 percent), California (down from 3.7 percent to 2.4 percent), Mississippi (down from 12.6 percent to 11.4 percent), Arkansas (down from 11.7 percent to 10.7 percent) and New Jersey (down from 6.7 percent to 5.7 percent).
“The good news is that fewer and fewer homeowners across the country are underwater on their loans,” said Rick Sharga, executive vice president of RealtyTrac, an ATTOM Data Solutions company. “But for those homeowners who are, the uncertainty of the economy during the pandemic looms large. The dual-trigger effect of losing a job and being underwater on a mortgage often unfortunately leads to a foreclosure.”
The four states where the percentage of seriously underwater homes rose from the third quarter to the fourth quarter of 2020 were Connecticut (up from 7.7 percent to 8.2 percent), Nebraska (up from 6.9 percent to 7.3 percent), North Dakota (up from 8 percent to 8.1 percent) and Massachusetts (up from 3.8 percent to 3.9 percent).
Northeast and West continue to have largest shares of equity-rich homes; Midwest and South have the smallest
Despite improvements in the Midwest and South during the fourth quarter of 2020, the Northeast and West again had far higher levels of equity-rich properties. The top 12 states with the highest levels in the fourth quarter were all in the Northeast and West, led by Vermont, (47.8 percent equity-rich), California (46.1 percent), Idaho (42.7 percent), Washington (41 percent) and Hawaii (40.4 percent).
Fourteen of the 15 states with the lowest percentage of equity-rich properties in the fourth quarter of 2020 were in the Midwest and South, led by Louisiana (17.1 percent), Illinois (17.1 percent), Oklahoma (18.3 percent), Arkansas (19.7 percent) and Alabama (19.8 percent).
Among 107 metropolitan statistical areas with a population greater than 500,000, the 10 with the highest shares of equity-rich properties in the fourth quarter of 2020 again were in the West, with the top five in California. They were led by San Jose, CA (65.7 percent equity-rich); San Francisco, CA (57.5 percent); Los Angeles, CA (51.7 percent); Santa Rosa, CA (45.1 percent) and San Diego, CA (44.5 percent). The leader in the Northeast region again was Boston, MA (38.9 percent), while Austin, TX, again led the South (39.1 percent) and Grand Rapids, MI, continued to top the Midwest (32.8 percent).
Metro areas with the lowest percentage of equity-rich properties in the fourth quarter of 2020 continued to be Baton Rouge, LA (13.5 percent equity-rich); Columbia, SC (14.7 percent); Little Rock, AR (15.5 percent); Akron, OH (16.3 percent) and Tulsa, OK (17.3 percent).
Among the 107 metro areas analyzed, 103 (96 percent) showed an increase in levels of equity-rich properties from the third to the fourth quarters of 2020; just four (4 percent) showed a decrease.
San Francisco area dominates list of top equity-rich counties
Among 1,547 counties that had at least 2,500 properties with mortgages in the fourth quarter of 2020, 23 of the top 25 equity-rich locations were in the West or Northeast regions. 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, CA (outside San Francisco) (71.2 percent equity-rich); Washington County, WI (outside Milwaukee) (69.9 percent); Santa Clara County (San Jose), CA (66.7 percent); San Francisco County (63.1 percent) and Dukes County (Martha’s Vineyard), MA (60.7 percent).
Counties with the smallest share were Hoke County, NC (outside Fayetteville) (8.2 percent); Vernon Parish, LA (west of Alexandria) (9.5 percent); Bossier Parish (Shreveport), LA (9.7 percent); Beauregard Parish, LA (north of Lake Charles) (10.7 percent) and Ascension Parish, LA (outside Baton Rouge) (10.8 percent).
At least half of all properties were equity-rich in 630 zip codes
Among 8,691 U.S. zip codes that had at least 2,000 properties with mortgages in the fourth quarter of 2020, there were 630 where at least half of all properties with a mortgage were equity-rich.
Thirty-eight of the top 40 were in California, mostly in the San Francisco Bay area. They were led by zip codes 94116 in San Francisco, CA (79.3 percent equity-rich), 94122 in San Francisco, CA (77.7 percent), 94040 in Mountain View, CA (76.6 percent), 94036 in Palo Alto, CA (76.5 percent) and 94087 in Sunnyvale, CA (76.3 percent).
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 fourth quarter of 2020 were all in the South and Midwest, led again by Louisiana (14.9 percent underwater), Mississippi (11.4 percent), West Virginia (11.4 percent), Iowa (11.3 percent) and Arkansas (10.7 percent). The smallest percentages were in Washington (2.2 percent), Oregon (2.3 percent), California (2.4 percent), Utah (2.5 percent) and Arizona (2.6 percent).
Among 107 metropolitan statistical areas with a population greater than 500,000, those with the highest share of mortgages that were seriously underwater in the fourth quarter of 2020 were Baton Rouge, LA (14.2 percent); Syracuse, NY (14 percent); Youngstown, OH (12.5 percent); Toledo, OH (11.3 percent) and Scranton, PA (11.2 percent).
Among the 107 metro areas, just 12 (11 percent) showed an increase in levels of underwater properties from the third to the fourth quarters of 2020; 95 (89 percent) showed a decrease.
At least 25 percent of all properties were seriously underwater in 81 zip codes
Among 8,691 U.S. zip codes that had at least 2,000 properties with mortgages in the fourth quarter of 2020, there were 81 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, OH, and St. Louis, MO.
The top five zip codes with the highest share of seriously underwater properties were 95969 in Paradise, CA (79 percent seriously underwater); 44110 in Cleveland, OH (52.9 percent); 53206 in Milwaukee, WI (49.2 percent); 44105 in Cleveland, OH (48.6 percent) and 71446 in Leesville, LA (46.3 percent).
Report methodology
The ATTOM Data Solutions U.S. Home Equity & Underwater report provides counts of properties based on several categories of equity — or loan to value (LTV) — at the state, metro, county and zip code level, along with the percentage of total properties with a mortgage that each equity category represents. The equity/LTV is calculated based on record-level loan model estimating position and amount of loans secured by a property and a record-level automated valuation model (AVM) derived from publicly recorded mortgage and deed of trust data collected and licensed by ATTOM Data Solutions nationwide for more than 155 million U.S. properties. The ATTOM Data Solutions Home Equity and Underwater report has been updated and modified to better reflect a housing market focused on the traditional home buying process. ATTOM Data Solutions found that markets where investors were more prominent, they would offset the loan to value ratio due to sales involving multiple properties with a single jumbo loan encompassing all of the properties. Therefore, going forward such activity is now excluded from the reports in order to provide traditional consumer home purchase and loan activity.
Definitions
Seriously underwater: Loan to value ratio of 125 percent or above, meaning the property owner owed at least 25 percent more than the estimated market value of the property.
Equity-rich: Loan to value ratio of 50 percent or lower, meaning the property owner had at least 50 percent equity.
To learn more about the data behind this article and what Attom Data Solutions has to offer, visit https://www.attomdata.com/.
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