The amount of seriously underwater homes in the United States saw its smallest year-over-year decrease since 2013, according to new data from Attom Data Solutions. Meanwhile the percentage of equity-rich homes enjoyed a year-over-year increase for the 10th consecutive quarter.
“We’ve reached a tipping point in this housing boom where enough homeowners have regained both sufficient equity and sufficient confidence to tap into their home equity — resulting in a noticeably slower decline in seriously underwater properties and slower growth in equity rich properties,” said Daren Blomquist, senior vice president at Attom Data Solutions. “This tapping of equity could take the form of a cash-out refinance, home equity loan or simply a home sale.”
He added, “We saw the biggest quarterly drop in average homeownership tenure for homeowners who sold in the first quarter since Q4 2008, evidence that more homeowners are reaching that equity-tapping tipping point more quickly and deciding to sell.”
A seriously underwater home is defined in the report as a property where, “the combined balance of loans secured by the property was at least 25 percent higher than the property’s estimated market value.”
In the first quarter of 2018, an estimated 5,206,446 homes were underwater — approximately 9.5 percent of U.S. homes with a mortgage. That’s down 291,000 from the first quarter of 2017, but up 174,261 from the fourth quarter of 2017.
Louisiana was the state with the highest percentage of homes underwater at 20.1 percent; followed by Mississippi at 18 percent; Iowa at 17.2 percent; West Virginia at 15.9 percent and Illinois at 15.9 percent. Scranton, Pennsylvania, was the metro area with the percentage of homes seriously underwater at 21.9 percent.
Equity rich properties — defined in the report as homes with “loan-to-value ratio of 50 percent or lower, meaning the property owner had at least 50 percent equity” — now represent more than 25 percent of all homeowners with a mortgage.
Compared to the first quarter of 2017, there are 122,609 more equity rich properties, a 1 percent increase. But following a similar trend, the total of equity rich homes is down from last quarter and 189,312 fewer than the high mark in the third quarter of 2017.
The highest share of equity rich properties were found in coastal California, Honolulu and Seattle. In both Hawaii and California, over 40 percent of properties are equity rich.