One of the nation’s leading providers of nationwide property data, ATTOM, released its second-quarter 2021 U.S. Home Equity & Underwater Report. The findings demonstrate the property market’s health by detailing how almost 35% of mortgaged homes are considered “equity rich.”
According to ATTOM, a home is defined as equity-rich when the home loan is half the property’s value. In other words, as property prices rise throughout the country, homeowner equity is also on the rise.
Per their report, almost one in three homes valued at, for example, $500,000 had mortgages less than half that size. This number was up from 31% in Q1 and 27.5% year-over-year.
Fortunately, only 4.1% of homes were seriously underwater in Q2 of 2021. ATTOM defines this as having a loan balance that is 25% more than the current market value. This number is a significant improvement from 5.2% in the last quarter and 6.2% year-over-year.
How Has Homeowner Equity Increased Nationwide?
Across the U.S., 48 states showed an increase in equity-rich homes and a decrease in underwater properties from Q1 to Q2. Additionally, compared to Q2 2020, every state saw equity-rich homes increase while underwater mortgages decreased.
These results were the most considerable increase in equity for two years. Moreover, it demonstrates the resilience of a U.S. housing market recovering well from the COVID-19 pandemic. The housing market has been booming for ten straight years now, and it shows little sign of slowing down.
What is Causing These Equity Increases?
These positive equity increases during Q2 are a result of rising median home prices. Nationwide, home prices were up 11% quarterly and a staggering 22% year-over-year from April through June.
In the majority of metro areas in the U.S., home prices increased at least 15% annually. Unfortunately, when home prices rise, home equity does too. As a result, these increases widen the gap between what homeowners owe and the value of their properties.
Familiar culprits like low housing stock and low-interest rates have pushed home prices higher. In addition, COVID-19 saw many homebuyers leave metro areas, causing a spike in home prices in more rural areas.
Which Areas are Showing the Biggest Equity Gains?
The West and Northeast show the most significant equity gains between Q1 and Q2 of 2021, contributing nine out of the ten states.
Arizona showed incredible growth during this period, rising from 16.3% to a phenomenal 39.7% in Q2. Other states showing growth were Massachusetts (25.3% up to 41.7%), New Hampshire (20.4% up to 36.1%), Rhode Island (21% up to 36.4%), and Delaware (10.5% up to 25.2).
Maryland was the only state to show a drop in equity-rich homes between the first and second quarters of the year. Its properties went from 23.5% down to 23.2%. Other areas with relatively slow growth were West Virginia, which remained at 19.8%, Nebraska (27% up to 27.1%), Alaska (22.5% up to 22.9%), and Montana (up from 40.4% to 40.8%).
Which Areas are Showing the Biggest Declines in Underwater Properties?
The South and West contributed seven of the ten states with the most significant declines in underwater properties. Tennessee was number one, with upside-down mortgages decreasing from 10.1% to 4.4%. Alabama (12.1% down to 6.6%), Delaware (9.9% down to 4.6%), Alaska (7% down to 3.1%), and Nebraska (8.6% down to 5%) all showing improvement.
Of course, not all states showed this sort of reduction. Underwater homes rose in Virginia (10.3% to 11.7%) and New Hampshire (2.4% to 2.55%). Homes in Hawaii (2.5% to 2.3%), New York (3.3% to 3.1%), and Utah (2.2% to 1.9%) showed modest improvements.
What Areas Have the Biggest Shares of Home Equity?
The West continues to post excellent numbers for equity-rich properties between the first two quarters of 2021. Seven out of the top eight states with the highest levels were in the West, with Idaho (54.2%), California (53.8%), and Vermont (53.3%) leading the way.
The Midwest and the South contain four of the fifteen states with the lowest equity-rich percentages, with Louisiana (17.1%), Illinois (18.4%), and Oklahoma (19.6%) lagging behind nationwide averages.
Which Metro Areas are Performing Well?
The report also looked at 106 metro areas with a population of over 500,000 people. Again the West features strongly, with nine out of ten best results between Q1 and Q2 2021.
Unsurprisingly, California metro areas featured heavily, with San Jose (69.4%), San Francisco (64.9%), and Los Angeles (57.9%) at the top.
Metro areas that contained the lowest percentage of equity-rich homes during Q2 were mainly in the Midwest and South. Baton Rouge, LA (13.5%), Columbia, SC (16.2%), and Little Rock, AR (17.5%) showed the lowest number of equity-rich homes. However, each of the 106 metro areas in the report increased year-over-year, with only one metro area decreasing from Q1 to Q2.
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