“With homeowners staying put longer, homeownership equity will most likely continue to strengthen. Those that are seriously underwater may find themselves coming up for air as they continue to pay off excessive legacy mortgages or sell." - Todd Teta, chief product officer with ATTOM
Despite signs of a cooling market, the number of “equity-rich” properties hit an all-time-high in 2018.
In the fourth quarter of 2018, there were roughly 14.5 million equity-rich properties — an increase of more than 834,000 from a year ago, which is its highest rate since the data started being tracked in the fourth quarter of 2013, according to ATTOM Data.
Those 14.5 million properties represent more than a quarter percent of all properties with a mortgage. The 25.6 percent of all properties with a mortgage is down slightly from 25.7 percent in the previous quarter but up from 25.4 percent in the fourth quarter of 2017.
Home equity is the difference between your property value and your existing loans. For example, if your home is worth $500,000 today and your mortgage balance is $250,000, you have $250,000 in equity. Equity-rich is the combined estimated amount of loans secured by the property is 50 percent or less of the property’s estimated market value.
Homeownership equity is anticipated to increase as more homeowners decline to move, said Todd Teta, chief product officer with ATTOM.
“With homeowners staying put longer, homeownership equity will most likely continue to strengthen. Those who are seriously underwater may find themselves coming up for air as they continue to pay off excessive legacy mortgages or sell,” Teta said. “This report helps to showcase a story of the West Coast markets having the highest share of equity-rich homeowners versus the South and Midwest markets, that continue to have stubbornly high rates of seriously underwater homeowners.”
As the number of equity-rich properties grew year-over-year, the amount of U.S. properties that were “seriously underwater” remained constant, according to ATTOM. Seriously underwater is where the combined estimated balance of loans secured by the property was at least 25 percent higher than the property’s estimated market value.
The report also shows more than 5 million U.S. properties were seriously underwater, representing 8.8 percent of all U.S. properties with a mortgage. The 8.8 percent share of seriously underwater homes remained largely unchanged from the previous quarter and down from 9.3 percent in the fourth quarter of 2017.
States with the highest share of equity-rich properties were California at 43.6 percent, Hawaii at 39.3 percent, New York at 34.2 percent and Washington at 34.2 percent.
Among 98 metro areas analyzed by ATTOM, those with the highest share of equity-rich properties were San Jose at 72 percent, San Francisco at 60.7 percent, Los Angeles at 48.5 percent and Honolulu at 40.2 percent.
The top five zip codes with the highest share of seriously underwater properties were in Trenton, New Jersey at 70.3 percent, Saint Louis at 64.8 percent, Harvey, Illinois at 62.3 percent and Memphis, Tennessee at 60.5 percent.