Roughly 16.7 million residential properties in the U.S. were considered equity-rich during the third quarter of 2020, meaning the combined estimated amount of loans secured by those properties was 50 percent or less of their estimated market value, according to a new report by Attom Data Solutions.
Equity-rich properties made up about one in four (28.3 percent) of the 58.9 million mortgaged homes in the U.S., up from 27.5 percent the previous quarter and from 26.7 percent the year before.
Only 3.5 million, or one in 17, mortgaged homes were considered seriously underwater during the third quarter, meaning the combined estimated balance of loans secured by the property equaled at least 25 percent more than the property’s estimated market value. That number is about 6 percent of all U.S. mortgaged homes, down from 6.2 percent the previous quarter and down from 6.5 percent during the third quarter of 2019.
Out of the 50 states, 49 saw a quarterly increase in the percentage of homes considered equity-rich, while only seven experienced an increase in underwater properties.
“Homeowner equity in the third quarter added another pebble to the pile of markers showing that the U.S. housing market continues to defy the broad downturn in the economy this year,” Todd Teta, chief product officer with Attom Data Solutions, said in a statement.
“Home prices keep rising, boosting the balance sheets of homeowners throughout most of the country. With the foundation under the housing market still shaky as the coronavirus remains a threat, we will continue to monitor closely the various metrics, including equity. But as it’s been throughout the pandemic, the market is strong and homeowners remain in a position to benefit.”
The Northeast sees significant gains
Across the U.S., four of the 10 states with the largest gains in the share of equity-rich homes were located in New England.
The most significant gains were seen in Vermont (equity-rich homes rose from 39.1 percent in the second quarter to 45.1 percent in the third quarter), Maine (up from 27.6 percent to 33.5 percent), South Dakota (up from 25.1 percent to 30.3 percent), New Hampshire (up from 22.6 percent to 26.7 percent) and Idaho (up from 35.4 percent to 39.5 percent).
The Midwest and South improve numbers of underwater properties
In terms of underwater properties, the largest declines were seen across the Midwest and South, with eight of the top 10 states in this category located in these regions. States with the top five greatest declines in underwater properties included Mississippi (share of seriously underwater homes down from 15 percent to 12.6 percent), South Dakota (down from 11.1 percent to 8.8 percent), Indiana (down from 7.8 percent to 6 percent), Iowa (down from 13.9 percent to 12.1 percent) and Connecticut (down from 9.3 percent to 7.7 percent).
Overall, the Northeast and West had the highest levels of equity-rich homes during the third quarter, with the greatest shares located in Vermont (45.1 percent of homes were equity-rich), California (39.7 percent), Hawaii (39.6 percent), Washington (39.5 percent) and Idaho (39.5 percent).
At the other end of the spectrum, Illinois (16.2 percent of homes were equity-rich), Louisiana (16.4 percent), Oklahoma (16.7 percent), Alabama (18.8 percent) and Arkansas (19.1 percent) held the lowest percentage of equity-rich homes.
There was some overlap, too, among this group and states with the highest share of seriously underwater mortgages, which were led by Louisiana (15.3 percent seriously underwater), West Virginia (13.8 percent), Mississippi (12.6 percent), Iowa (12.1 percent) and Arkansas (11.7 percent).
By metro and zip code
Nine out of the 10 metro areas with a population greater than 500,000 that contained the highest share of equity-rich properties were located in the West, and included San Jose, California (63.7 percent equity-rich); San Francisco, California (49.7 percent); Los Angeles, California (44 percent); Seattle, Washington (42 percent); and Boise, Idaho (40.4 percent).
Out of the 8,679 U.S. zip codes that had at least 2,000 properties with mortgages during the third quarter, there were 379 zip codes where at least half of all mortgaged properties were equity-rich. The majority of the top 20 zip codes were located in California, with most in the San Francisco Bay area. The top zip codes were led by 94116 in San Francisco (79.1 percent equity-rich), 94122 in San Francisco (78.6 percent), 94112 in San Francisco (77.1 percent), 94087 in Sunnyvale, California (76 percent) and 95130 in San Jose, California (75.8 percent).
At the metro level, among 107 metro areas with a population greater than 500,000, the highest shares of mortgages that were seriously underwater were located in Baton Rouge, Louisiana (14.5 percent); Youngstown, Ohio (14 percent); Syracuse, New York (13.5 percent); Scranton, Pennsylvania (13.1 percent); and Cleveland, Ohio (12.4 percent).