More Homeowners Become 'Equity Rich'

A new report from ATTOM has good news for almost half of American homeowners with mortgages: their loan balances are getting smaller.

“Homeowner wealth took a notable turn for the better during the second quarter as equity levels piggybacked on some of the biggest home-price spikes we’ve seen in recent years,” said ATTOM CEO Rob Barber.

Data showed that 49.2% of mortgaged residential properties in the U.S. were considered “equity rich” for 2Q 2024, up from 45.8% in the first quarter. This means that “the combined estimated amount of loan balances secured by those properties was no more than half of their estimated market values.” The report defines equity-rich to mean a loan-to-value ratio of 50 percent or lower, meaning the property owner had at least half equity.

The spring buying season saw home prices soar 9% in the quarter to a new record of $365,000. ATTOM said rising home prices raised equity levels by widening the gap between the estimated value of homes and the amounts homeowners owed on their loans. It said a limited supply of homes for sale and increased summer demand helped push prices higher.

In 48 states, the share of mortgages that were equity-rich, increased between the first and second quarters of 2024, usually by more than two percentage points. The biggest increases were in lower-priced markets, especially in the South and Midwest, with Kentucky, Illinois, Missouri, Oklahoma and Alabama leading the way. There was no change in Utah and South Dakota. An even happier finding of the analysis was that the share of home mortgages that were seriously underwater fell to 2.4% in 2Q 2024 from 2.7% in 1Q 2024.

“Seriously underwater mortgages are those with combined estimated balances of loans secured by properties that are at least 25 percent more than those properties’ estimated market values,” the report noted. The biggest decreases in underwater loans were in the South and Midwest.

However, two states, Utah and South Dakota, experienced slight upticks. There were only 19 zip codes nationwide where more than 20 percent of mortgaged properties were seriously underwater.

The Northeast and West hosted the highest levels of equity-rich mortgaged properties in the U.S. Vermont topped the list with 83.5%, followed by Maine (61.5%), New Hampshire (61.1%), Montana (61.1%) and Rhode Island (60.2%).

In contrast, the Midwest and South were home to nine of the 10 states with the lowest levels of equity-rich mortgaged properties in 2Q 2024. In Louisiana, just 21% of mortgaged properties were equity-rich, with slightly better outcomes in Alaska (31), North Dakota (32%), West Virginia (33.6%) and Oklahoma (34.5%).

Upscale metros with at least 500,000 in population and median home values over $400,000 had the highest portion of equity-rich properties. The group was led by San Jose, Miami, San Diego, Los Angeles, and Portland, ME. In the Midwest, Grand Rapids, with a median price of $325,000, topped the list. Again, the South and Midwest had the lowest percentage of equity-rich properties.

By county, the top 30 equity-rich locations were spread across the Midwest, Northeast or West regions, with Michigan and Vermont leading the way. The South was home to 19 of the 20 counties with the smallest share of equity-rich homes, especially in Louisiana. However, counties in this category with populations over 500,000 were concentrated in the Midwest (Cook County, IL, Hennepin, MN, Cuyahoga, OH) and Northeast (Philadelphia, PA and New York County, NY).

Among the top 50 equity-rich zip codes, 41 were in California, Florida or Texas, including five each in Santa Barbara, CA, and Irvine, CA.