Equity is rising and seriously underwater homeowners are dropping as the damage from the housing slump subsides, according to Attom Data Solutions. Seriously underwater properties declined by 776,000 nationwide since the second quarter of 2015 and 37,235 compared to the first quarter this year, according to the data firm’s Home Equity and Underwater Report.

  • At the end of the second quarter, 6.7 million homes were reported seriously underwater, representing 11.9 percent of the mortgaged home market.
  • In San Francisco, underwater homes made up 3.7 percent of the market in Q2.
  • Austin was another locale with low underwater rates, registering at 3.9 percent.
  • Some major cities had 15 percent or more of homes considered seriously underwater, including Chicago, Baltimore and Miami.

Equity is rising and seriously underwater homeowners are dropping as the damage from the housing slump subsides, according to Attom Data Solutions. Seriously underwater properties declined by 776,000 nationwide since the second quarter of 2015 and 37,235 compared to the first quarter this year, according to the data firm’s Home Equity and Underwater Report.

Seriously underwater is defined as a loan-to-value ratio of 125 percent or higher, meaning the homeowner owes 25 percent more than the home’s estimated market value.

equity-rich properties

According to Attom, equity-rich properties comprised 22.1 percent of mortgaged homes at the end of the second quarter, up from 22 percent the previous quarter and 19.6 percent last year. Equity rich is defined as a loan-to-value ratio of 50 percent or less.

“This is primarily driven by rising home prices,” said Daren Blomquist, senior vice president of Attom. “We’ve seen 52 consecutive months of annual price appreciation across the country. As of June, we are at a new all-time high of home prices nationwide, helping lift home equity”

At the end of the second quarter, 6.7 million homes were reported seriously underwater, representing 11.9 percent of the mortgaged home market.

Seriously underwater homes are on a steady decline back to normalcy, the report shows. In the first quarter, seriously underwater homes comprised 12 percent of the market. One year ago, they made up 13.3 percent of the market. Four years ago, there were 12.8 million seriously underwater homes in the U.S.

In the second quarter of 2012, seriously underwater homes reached 12.8 million. Since then, the percentage of homeowners owning 25 percent or more than the market value of their home has declined by almost half.

Bay Area, Texas see low underwater rates

Of the top metro areas with the lowest share of seriously underwater properties in Q2, three were in California. In San Francisco, underwater homes made up 3.7 percent of the market. Oxnard-Thousand Oaks-Ventura wasn’t far behind, with 4.1 percent homes underwater. However, both markets are looking up to San Jose, which held an impressive 1.7 percent rate of underwater homes by the end of the quarter.

The market in Los Angeles also ranked well for large metros, with just 5 percent of homes in the area seriously underwater.

Helped by a growing job force, Austin is sitting prettier than much of the country, with 3.9 percent of homes in the market considered underwater. Other Texas markets where the share of underwater homes was below 10 percent include Houston (5.7 percent), Dallas-Fort Worth (6 percent) and San Antonio (6.4 percent).

“People are moving to these cities because of higher paying jobs,” Blomquist said. “But not all of these metros are high-priced, especially further down the list.”

New York boroughs vary

New York City’s rate of underwater homes differed significantly by borough, with New York County (Manhattan) ranking worst among them. New York County held a rate of 27.9 percent of underwater homes at the end of Q2. Bronx County didn’t fare quite as bad but still holds room for improvement, with 18.6 percent of homes considered underwater.

However, Kings County (Brooklyn) and Queens County told a different story: Underwater homes accounted for 8.8 percent of homes in Kings County by the end of Q2, accoridng the report, and Queens County held a rate of 8 percent.

Chicago, Miami and Baltimore slow to recover

Some major cities had 15 percent or more seriously underwater homes at the end of Q2, including Chicago at 22.4 percent. Miami and Baltimore were in the same ballpark, with 17.3 percent and 16.4 percent of homes considered underwater, respectively.

underwater properties

“The reason we see higher percentage underwater is these markets have not bounced back as robustly, because the fundamentals are working against them in terms of population, demographic patterns and jobs,” Blomquist said.

Owner-occupied vs. investors equity

Attom outlined a profile of home equity against homeownership characteristics, and factors like occupancy status and ownership type showed investor and corporate-owned properties at a higher risk.

Non-owner occupied properties had a higher rate of seriously underwater properties (21.8 percent) in Q2 compared to occupied properties (9.1 percent), Attom says. In addition, 43.5 percent of properties owned by a corporation were seriously underwater, compared to 10.1 percent owned by a husband and wife.

“These investors and corporate owned properties tend to be in more volatile risk areas; markets that have not bounced back as quickly,” Blomquist said. “The corporate investors are chasing rental yields, not price appreciation.”

Email Jennifer Riner

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