‘Underwater Homes’ Rising, ‘Equity Rich’ Falling

May 9, 2019

Home prices are slowing compared to a year ago. That’s prompting the share of properties considered “equity rich” to decrease and the share of “seriously underwater” properties to grow to 9.1% of all U.S., homes, according to a newly released report reflecting first-quarter data from ATTOM Data Solutions.

At the end of the first quarter, more than 5.2 million U.S. properties were seriously underwater, meaning the combined balance of loans secured by the property is at least 25% higher than the property’s estimated market value. That number is up by more than 17,000 properties from a year ago.

“With home prices increasing at a slower pace in 2018 than in previous years, the potential for people to climb out from mortgages that are underwater or advance into equity-rich territory tends to be reduced,” says Todd Teta, chief product officer at ATTOM Data Solutions. “However, only one in 11 mortgages are seriously underwater today, compared to nearly one in three during the depths of the recession. Although, if the latest trend continues, it will raise another clear signal of a market slowdown, which will be good for buyers, but not so good for sellers. But if the pattern of the past few years takes hold–with levels of underwater and equity rich mortgages turning around–it will mean the market remains strong for sellers, with fewer needing to get out from under financial distress.”

The highest shares of seriously underwater homeowners are in Louisiana, Mississippi, Arkansas, and West Virginia. The metros with the highest shares of seriously underwater properties, as of the first quarter, were in the following areas:

  • Baton Rouge, La.: 21.3%
  • Scranton, Pa.: 20%
  • Youngstown, Ohio: 19.2%
  • Toledo, Ohio: 19.2%
  • New Orleans: 17.8%

 

 

On the other hand, the report shows homeowners are feeling the richest in California, Hawaii, New York, Washington, and Vermont.

Researchers call homes “equity rich” when owners have at least 50% equity in the home's value. The top five metros for homeowners with the highest share of equity-rich properties in the first quarter were all in California, including:

  • San Jose, Calif.: 68.3%
  • San Francisco: 58.4%
  • Los Angeles: 48.1%
  • Santa Rosa, Calif.: 47.6%
  • San Diego: 39.3%