Navigating Choppy Waters: An In-Depth Analysis of U.S. Home Equity & Underwater Report for Q1, 2024

IRVINE, CA — Recent data from ATTOM’s Q1, 2024 U.S. Home Equity and Underwater Report indicates a shifting landscape in the U.S. housing market. A drop in the equity-rich status of mortgaged residential properties and a slight rising trend in seriously underwater homes emerge as signs of a potential change in course.

The report indicates that equity-rich homes – those with a mortgage account balance amounting to less than half of their estimated market value – accounted for 45.8 percent of all mortgaged residential properties in the first quarter of 2024. The figure dipped slightly from 46.1 percent at the end of last year, extending the trend of successive quarterly declines to three.

Meanwhile, in contrast to the trend of diminishing equity-rich status, the first quarter saw the proportion of homes seriously underwater – those where the estimated loan balance exceeds the property’s assessed market value by at least 25 percent – edge up from 2.6 to 2.7 percent.

Rob Barber, CEO of ATTOM, noted that while homeowners continue to derive significant value from the equity surge of boom times, there are indications these gains are beginning to dwindle. With the market cooling off from the previous overheated state, we now look towards the spring buying season to understand if a new long-term pattern is taking shape.

The drop in home equity coincides with a modest dip in the national median single-family home and condo value. It suggests that even as homeowners continue to make headway in paying off their mortgages, flattening or declining home prices could invariably lead to erosion in equity.

As the spring buying season approaches, the housing market is poised to face a series of influencing forces. These include a constrained supply of homes up for sale and a strong investment market, counterbalanced by rising mortgage interest rates and high home prices, which remain a financial burden for average wage earners.

The report also indicates a regional disparity in the equity-rich share of mortgages. Southern states like Kentucky, South Carolina, Georgia, Delaware, and Indiana saw the most significant quarterly declines in equity-rich homes. Conversely, states in the Midwest and West, such as South Dakota, Hawaii, Montana, North Dakota, and Mississippi, experienced slight improvements.

More worryingly, the percentage of mortgaged homes deemed seriously underwater rose in most states. Southern states, already grappling with high levels of seriously underwater properties, witnessed the most significant quarterly rise.

While the Northeast and West regions continue to dominate the list of states with high levels of equity-rich homeowners, the lowest percentages are reported in the Midwest and Southern states. Upscale metropolitan areas with median home values surpassing $400,000 constitute the majority of places with the highest proportion of equity-rich homes.

The report concludes with a snapshot of the equity situation at the county level. The Midwest, Northeast, and West regions dominate the top spots for equity-rich properties. Unfortunately, the South lacks representation in the top 25 locations but occupies 23 of the 25 spots for the smallest share of equity-rich homes.

This first-quarter report serves as a timely reminder of the rapidly changing dynamics in the housing market. All eyes will now be on the spring buying season, which will provide clearer indications of potential long-term trends shaping the housing market. With interest rates rising and home prices remaining high for average wage earners, equity and its possible erosion will continue to be a significant area of interest for homeowners, potential buyers, and market observers alike.

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