Booming Market Drives Homeowners’ Net Worth Rise

The most recent edition ATTOM United States Home Equity & Underwater Report for the fourth quarter shows that nearly half of mortgaged residential properties were considered “equity rich,” meaning that the remaining balance on a mortgage did not exceed 50% of their estimated market value.

In the fourth quarter, the share of equity-rich mortgage homes rose to 41.9%, from 39.5% in the third quarter, 28.3% in the second quarter and 30.2% year-on-year.

On the other hand, a small number of homes – 3.1% or one in 29 – had mortgages that were considered “seriously underwater”. That number was down from 3.4% in the third quarter, 4.1% in the second quarter and 5.4% from a year earlier.

“Across the country, 48 states saw stock-rich levels increase in the third through fourth quarters of 2021, while seriously-underwater percentages declined in 46 states,” the report said. “Year-over-year, stock-rich levels rose in 49 states, including the District of Columbia, while seriously-underwater portions fell in 48 states, including the District of Columbia.”

These gains, which occurred at both ends of the equity spectrum, came as the housing market had its best year in a decade, even as the economy continues to recover from the COVID-19 pandemic. The market surged on historically low interest rates and changing consumer preferences in light of the “work from home” phenomenon that spread at the start of the pandemic from buyers who wanted escape congested viral hotspots to more rural areas with homes and yards.

All of these events also led the average home price to cross the $300,000 mark last year, with most properties seeing a 10% increase in value over the year.

“Another quarter, another boost for owner balance sheets in most of the United Statesthat was the story of the fourth quarter of last year. As home prices continued to rise, so did the accumulated equity in residential properties, to the point that nearly half of all mortgage payers nationwide ended up in equity-rich territory,” said Todd Teta, product manager at ATTOM. “Undoubtedly, there are market indicators that warn of the duration of the boom and the continued improvement in equity. We continue to monitor them closely. But for now, homeowners are sitting well as the wealth they have hidden in their homes continues to grow.

Across all the ZIP Codes (8,657 ZIP Codes in total), there are 2,466 areas where at least half of the mortgaged properties within their boundaries were equity-rich. On the other hand, there were only 18 ZIP codes where more than 25% of mortgaged properties were seriously underwater.

“Forty-five of the top 50 were still in California, Texas, Massachusetts and Idaho, with 13 of the top 25 in Austin, Texas. They were led by ZIP codes 02539 in Edgartown, Massachusetts (82.7% mortgaged properties were high in equity); 78739 in Austin, Texas (82.1%); 78617 in Del Valle, Texas (81.7%); 02557 in Oak Bluffs, Massachusetts (81.6%) and 78749 in Austin, TX (81.3%).”

Nine of the 10 states with the highest shares of seriously underwater mortgages in the fourth quarter of 2021 were in the South and Midwest. The top five were Wyoming (14.3% seriously underwater), Mississippi (12.2%), Louisiana (10%), Illinois (7.1%) and Iowa (7% ).

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