IRVINE, Calif. – Attom has released its fourth-quarter 2023 U.S. Home Equity & Underwater Report, which shows that 46.1% of mortgaged residential properties in the United States were considered equity-rich in the fourth quarter, meaning that the combined estimated amount of loan balances secured by those properties was no more than half of their estimated market values.
The portion of mortgaged homes that was equity-rich in the fourth quarter of 2023 decreased from 47.4% in the third quarter of 2023, marking the second straight quarterly decline. The latest figure also was down from 48% in the fourth quarter of 2022.
At the same time, the report shows that the portion of mortgaged homes that were seriously underwater in the U.S. rose slightly in the last few months of 2023, from 2.5% to 2.6% of all residential mortgages. Seriously underwater mortgages are those with combined estimated balances of loans secured by properties that are at least 25% more than those properties’ estimated market values.
“There are increasing signs suggesting that the extended period of prosperity in the U.S. housing market may be showing signs of easing,” said Rob Barber, CEO for ATTOM. “It’s not as if there are big warning signs flashing. Similar things were happening early last year before the market surged in the Spring. But the softening of equity follows a dip in resale profits last year for the first time in more than a decade as prices have stopped soaring through the roof. This year’s peak buying season will tell us a lot about whether things really have settled down long-term.”
The fourth quarter price decline capped off a year when the median home price grew annually by just 2%, marking the weakest growth since 2012 when the U.S. housing market was just starting to recover from the aftermath of the Great Recession that hit in the late 2000s. Prices grew at only a modest pace in 2023 amid a mixed scenario of rising mortgage rates that offset upward pressure from a tight supply of homes for sale, strong employment and a rising investment market.
The potential for more uneven equity trends remains in place as the housing market heads into its annual peak Spring and Summer buying season but faces elevated prices that remain a financial stretch for wide swaths of the potential buying public.
Equity-rich share of mortgages drops in most states
The portion of mortgages that were equity-rich decreased in 41 of the 50 U.S. states from the third quarter of 2023 to the fourth quarter of 2023, commonly by one to three percentage points.
The biggest declines came in the Midwest and West regions, led by Missouri (portion of mortgages homes considered equity-rich decreased from 41.9% in the third quarter of 2023 to 37.3% in the fourth quarter of 2023), Minnesota (down from 39.5% to 35.9%), Michigan (down from 48.5% to 45.1%), Washington (down from 56.7% to 53.5%) and Utah (down from 56.8% to 53.7%).
At the other end of the scale, equity-rich levels rose in just nine states from the third quarter to the fourth quarter of last year, with the largest improvements concentrated in the Northeast region. The biggest increases were in Vermont (up from 79.8% to 82.8%), West Virginia (up from 30.5% to 32%), Wyoming (up from 39.9% to 41.2%), New Jersey (up from 45.9% to 46.8%) and Connecticut (up from 41.5% to 42.4%).
Seriously underwater mortgage levels up slightly in most states
The portion of mortgaged homes considered seriously underwater rose nationwide from one in 40 during the third quarter of 2023 to one in 38 during the fourth quarter. The ratio went up in 42 states, mostly by less than one percentage point.
The biggest increases were clustered in the Midwest and South, regions that already had some of the nation’s highest levels of seriously underwater mortgages. The largest quarterly increases were in Wyoming (share of mortgaged homes that were seriously underwater up from 5.9% in the third quarter of 2023 to 8.8% in the fourth quarter of 2023), Missouri (up from 3.9% to 5.6%), Oklahoma (up from 4.6% to 5.5%), North Dakota (up from 4.6% to 5.2%) and Illinois (up from 4.4% to 5.1%).
On the flip side, states where the percentage of seriously underwater homes decreased the most from the third to the fourth quarter of last year were Idaho (down from 2.7% to 2.3%), California (down from 1.6% to 1.3%), West Virginia (down from 4.6% to 4.4%), Texas (down from 2.% to 2.2 %) and Vermont (down from 0.9% to 0.7%).
Among 107 metropolitan statistical areas around the nation with a population of at least 500,000, the West and South again dominated the list of places with the highest portion of mortgaged properties that were equity-rich.
All but four of the top 25 metros were in those regions during the fourth quarter of 2023, led by San Jose, CA (69.1% equity-rich); San Diego, CA (63.7%); Portland, ME (63.6%); Los Angeles, CA (63.5%) and San Francisco, CA (61.8.%). The leader in the South region was Miami, FL (61.8%) while the top metro in the Midwest continued to be Grand Rapids, MI (51.7%).
The 15 metro areas with the lowest percentages of equity-rich properties in the fourth quarter of 2023 were in the Midwest or South. The smallest levels were in Baton Rouge, LA (13.8% of mortgaged homes were equity-rich); Little Rock, AR (26.1%); New Orleans, LA (26.2%); Des Moines, IA (26.9%) and Virginia Beach, VA (27.6%).
The portion of mortgaged homes considered equity rich declined from the third quarter of 2023 to the fourth quarter of 2023 in 80 of the 107 metro areas with sufficient data (75%) while the portion decreased from the fourth quarter of 2022 to the same period of 2023 in 67%.
At least half of all mortgaged properties considered equity-rich in nearly 40% of zip codes.
Among 9,081 U.S. zip codes that had at least 2,000 residential properties with mortgages in the fourth quarter of 2023, there were 3,412 (38%) where at least half the mortgaged properties were equity-rich.
Thirty-four of the top 50 zip codes were in California, Florida and Massachusetts. The largest shares were in zip codes 34102 in Naples, FL (86.8% of mortgaged properties were equity-rich); 83340 in Ketchum, ID (86.4%); 02539 in Edgartown, MA (85.1%); 94024 in Los Altos, CA (84.4%) and 92657 in Newport Coast, CA (84.4%).
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