ATTOM Data Solutions’ Year-End 2016 U.S. Home Equity & Underwater Report, shows that as of the end of 2016 there were 5.4 million (5,408,323) U.S. properties seriously underwater — where the combined loan amount secured by the property was at least 25 percent higher than the property’s estimated market value — a decrease of more than 1 million properties (1,028,058) from a year ago.
The 5.4 million seriously underwater properties at the end of 2016 represented 9.6 percent of all U.S. properties with a mortgage, down from 10.8 percent at the end of Q3 2016, and down from 11.5 percent at the end of 2015 to the lowest level since ATTOM Data Solutions, parent company to RealtyTrac, began tracking in Q1 2012.
The report is based on publicly recorded mortgage and deed of trust data collected and licensed by ATTOM Data Solutions nationwide along with an industry standard automated valuation model (AVM) updated monthly in the ATTOM Data Warehouse of more than 150 million U.S. properties (see full methodology below).
“Since home prices bottomed out nationwide in the first quarter of 2012, the number of seriously underwater U.S. homeowners has decreased by about 7.1 million, an average decrease of about 1.4 million each year,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. “Meanwhile, the number of equity rich homeowners has increased by nearly 4.8 million over the past three years, a rate of about 1.6 million each year.
“Despite this upward trend over the past five years, the massive loss of home equity during the housing crisis forced many homeowners to stay in their homes longer before selling, effectively disrupting the historical domino effect of move-up buyers that feeds both demand for new homes and supply of inventory for first-time homebuyers,” Blomquist noted. “Between 2000 and 2008, our data shows the average homeownership tenure nationwide was 4.26 years, but that average tenure has been trending steadily higher since 2009, reaching a new record high of 7.88 years for homeowners who sold in 2016.”
Equity Rich Properties
The report also found that as of the end of 2016 there were 13.9 million (13,877,315) U.S. properties that were equity rich — where the combined loan amount secured by the property was 50 percent or less of the property’s estimated market value — an increase of nearly 1.3 million (1,256,041) from a year ago.
The 13.9 million equity rich properties at the end of 2016 represented 24.6 percent of all U.S. properties with a mortgage, up from 23.4 percent at the end of Q3 2016 and up from 22.5 percent at the end of 2015.
Historical U.S. Underwater & Equity Rich Trends
States with Highest Amount of Seriously Underwater Properties
States with highest share of seriously underwater properties were Nevada (19.5 percent), Illinois (16.6 percent), Ohio (16.3 percent), Missouri (14.6 percent), and Louisiana (14.5 percent).
Among 88 metropolitan statistical areas with a population of at least 500,000 and sufficient home value and loan data, those with the highest share of seriously underwater properties were Las Vegas (22.7 percent); Cleveland (21.5 percent); Akron, Ohio (20.1 percent); Dayton, Ohio (20.0 percent); and Toledo, Ohio (19.9 percent).
“In the markets HER Realtors serves, there was a substantial reduction in properties underwater as well as an increase in owners who are at less than 50 percent LTV — consistent with rising home prices across Ohio, driven by a strong buyer’s market and lack of inventory,” said Matthew L. Watercutter, senior regional vice president and broker of record for HER Realtors, covering the Dayton, Columbus and Cincinnati markets in Ohio. “One of the primary reasons we have a shortage of inventory is due to the high number of homeowners who are still underwater, making it difficult to sell and move as they would need to conduct a short sale or bring money to the closing. A high percentage of those homeowners are waiting it out until they are no longer underwater or in a better position to sell, contributing to the shortage of inventory. I expect this dynamic to continue through 2017.”
Along with Las Vegas and Cleveland, other metro areas with at least one million people and at least 14.5 percent of properties seriously underwater at the end of 2016 were Detroit (17.5 percent); Chicago (16.9 percent); Orlando (15.7 percent); Memphis (14.6 percent); and Jacksonville, Florida (14.5 percent).
States with Highest Share of Equity Rich Properties
States with the highest share of equity rich properties at the end of 2016 were Hawaii (37.8 percent), Vermont (36.9 percent), California (36.0 percent), New York (34.9 percent), and Oregon (32.0 percent).
Among 88 metropolitan statistical areas with a population of at least 500,000 and sufficient home value and loan data, those with the highest share of equity rich properties were San Jose, California (51.6 percent); San Francisco (47.7 percent); Honolulu (39.8 percent); Los Angeles (39.2 percent); and Pittsburgh, Pennsylvania (35.8 percent).
“Clearly the big news here is the rapid drop in the number of seriously underwater homeowners between 2013 and 2016 from 197,000 (23.7 percent) to just 44,000 (4.5 percent),” said Matthew Gardner, chief economist with Windermere Real Estate, covering the Seattle market, where 32.5 percent of properties with a mortgage were equity rich as of the end of 2016 — ninth highest among all metro areas analyzed for the report. “Simultaneously we’ve seen the number of equity rich homeowners climb from 168,000 to over 322,000. All of this is largely a result of Seattle’s employment and income growth, which are well above the national average.
“While I’m happy to see the number of ‘distressed’ households drop significantly, the increase in equity rich homeowners further compounds the issue of housing affordability that we’re seeing in Seattle, which will likely get worse with further increases in both home prices and mortgage rates,” Gardner added.
Profile of Seriously Underwater Properties
Some characteristics of the 5.4 million seriously underwater U.S. properties as of the end of 2016:
- 4 percent of non-owner occupied (investment) properties with a mortgage were underwater as of the end of 2016 compared to only 6.8 percent of owner-occupied properties.
- 6 percent of properties in high-risk flood zones were seriously underwater (above national average of 9.6 percent).
- Based on years owned range, the highest share of underwater properties is those that have been owned between 10 and 15 years (12.0 percent), followed by those that have been owned five to 10 years (10.6 percent). The lowest share of seriously underwater properties were those owned more than 20 years (7.2 percent) followed by those owned between one and five years (8.6 percent).
- 9 percent of all properties secured by loans originated in 2006 were seriously underwater at the end of 2016, the highest share of seriously underwater of any loan vintage in the last 20 years, followed by 2007 vintage (23.5 percent seriously underwater) and 2005 vintage (21.5 percent seriously underwater).
Profile of Equity Rich Properties
Some characteristics of the 13.0 million equity rich U.S. properties as of the end of 2016:
- 5 percent of properties located in high-risk flood zones were equity rich as of the end of 2016, below the national average of 24.6 percent.
- Based on years owned range, the highest share of equity rich were for properties owned more than 20 years (45.4 percent), followed by those owned 15 to 20 years (32.4 percent).
- 4 percent of all properties secured by 1998 vintage loans were equity rich at the end of 2016, the highest share of equity rich of any loan vintage in the last 20 years, followed by 1999 vintage (44.7 percent equity rich) and 2000 vintage (40.8 percent equity rich).
Decreasing Homeownership Tenures
Among 316 metropolitan statistical areas analyzed for homeownership tenure, there were 54 (17 percent) where the average homeownership tenure for sellers in 2016 decreased compared to a year ago, including Denver; Orlando; Louisville, Kentucky; Tucson, Arizona; and Fresno, California.
The remaining 262 markets (83 percent) where the average homeownership tenure increased in 2016 compared to 2015 included New York; Los Angeles; Chicago; Dallas; and Houston.
Among 52 metro areas with a population of at least one million, those with the longest average homeownership tenure for homes sold in 2016 were Hartford, Connecticut (11.57 years); Providence, Rhode Island (10.36 years); Boston (10.04 years); San Francisco (9.92 years); and San Jose, California (9.79 years).
Among those same 52 metro areas with a population of at least one million, those with the shortest average homeownership tenure in 2016 were Rochester, New York (4.67 years); New Orleans (4.85 years); Louisville, Kentucky (4.93 years); Virginia Beach (5.37 years); and Atlanta (5.66 years).
Year-End 2016 Seriously Underwater Data by State
Year-End 2016 Equity Rich Data by State
To read the full report click here.
Seriously underwater: Loan to value ratio of 125 percent or above, meaning the homeowner owed at least 25 percent more than the estimated market value of the property.
Equity rich: Loan to value ratio of 50 percent or lower, meaning the homeowner had at least 50 percent equity.
About ATTOM Data Solutions
ATTOM Data Solutions is the curator of the ATTOM Data Warehouse, a multi-sourced national property database that blends property tax, deed, mortgage, foreclosure, environmental risk, natural hazard, health hazards, neighborhood characteristics and other property characteristic data for more than 150 million U.S. residential and commercial properties. The ATTOM Data Warehouse delivers actionable data to businesses, consumers, government agencies, universities, policymakers and the media in multiple ways, including bulk file licenses, APIs and customized reports.