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Parts of America See Huge Home Equity Gains, Others Languish

Alex Tanzi
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Parts of America See Huge Home Equity Gains, Others Languish

(Bloomberg) -- A decade after the recession sparked by the collapse of the housing market, the fortunes of homeowners keep getting better in large swaths of America, but not all.

Just 3.5 million homes with mortgages in the U.S. -- or about one in 15 -- are “seriously underwater” in the third quarter, meaning the estimated market value of the property was at least 25% below what is still owed on the mortgage, according to data compiled by Irvine, California-based ATTOM Data Solutions released on Thursday.

Since the first quarter of 2012 when ATTOM Data Solutions began tracking this number and the housing market was still in crisis, seriously underwater homes have fallen from 12.5 million to 3.5 million last quarter.

Meanwhile, nearly a quarter of mortgaged homes -- or 14.4 million -- were “equity rich,” meaning the loan-to-value ratio is 50% or lower, according to the ATTOM figures. California had the highest share of “equity rich” residential properties at 41%, followed by Hawaii, Vermont, New York and Washington.

The median sales price for an existing home jumped 5.9% in September from a year earlier, the biggest annual gain since January 2018, to $272,100.

Housing wealth in the West has risen substantially in recent years -- doubling from a post-recession low reached in early 2012. The median price in the West was $403,600, up 4.5% from September 2018, well above the prices in the Northeast, South and Midwest. But high prices and gains in housing equity may be causing homeowners to consider moving, too. A recent NAR survey found that more than four in five homeowners in the West said “now is a good time to sell.”

“The latest numbers reveal another profound impact of the extended housing boom, as far more homeowners find themselves on the right side of the balance sheet instead of the wrong side,” said Todd Teta, ATTOM’s chief product officer. “This is a complete turnabout from what was happening when the housing market crashed during the Great Recession.

“There are notable equity gaps between regions and market segments,” he said. “But as home values keep climbing, homeowners are seeing their equity building more and more.”

Among metropolitan areas with a population greater than 500,000, four of the top five “equity rich” areas are in California: San Jose led the way the highest share of equity-rich properties at 62.7% followed by San Francisco at 51.1%, Los Angeles at 46.6% and Santa Rosa at 46.5%.

“Home prices are rising too rapidly because of the housing shortage, and this lack of inventory is preventing home sales growth potential.” said Lawrence Yun, National Association of Realtor’s chief economist after the monthly sales report.

States where fewer than 15% of homes are “equity rich” include Louisiana, Oklahoma, Illinois, Arkansas and Alabama. Louisiana is the only state where the proportion of “equity rich” homes is lower than those “seriously underwater.”

The most “seriously underwater” area was in central Louisiana where close to two thirds of mortgaged homes were valued at $100 or less for every $125 owed.

Other places where homeowners owe the bank more than their house is worth included Cleveland, Ohio; Trenton, New Jersey; Milwaukee, Wisconsin; and St. Louis, Missouri, according to ATTOM’s data.

To contact the reporter on this story: Alex Tanzi in Washington at atanzi@bloomberg.net

To contact the editors responsible for this story: Sarah McGregor at smcgregor5@bloomberg.net, Anita Sharpe

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