Arizona No. 1 as home equity surges across U.S.

ATTOM, curator of the nation’s premier property database, today released its second-quarter 2021 U.S. Home Equity & Underwater Report, which shows that 34.4 percent of mortgaged residential properties in the United States were considered equity-rich in the second quarter, meaning that the combined estimated amount of loans secured by those properties was no more than 50 percent of their estimated market value.

The portion of mortgaged homes that were equity-rich in the second quarter of 2021 – one in three – was up from 31.2 percent in the first quarter of 2021 and from 27.5 percent in the second quarter of 2020.

Nine of the 10 states with the biggest gains in the share of equity-rich homes from the first quarter of 2021 to the second quarter of 2021 were in the West and Northeast. States with the biggest increases included Arizona, where the portion of mortgaged homes considered equity-rich rose from 16.3 percent in the first quarter of 2021 to 39.7 percent in the second quarter, Massachusetts (up from 25.3 percent to 41.7 percent), New Hampshire (up from 20.4 percent to 36.1 percent), Rhode Island (up from 21 percent to 36.4 percent) and Delaware (up from 10.5 percent to 25.2 percent).

The report also shows that just 4.1 percent of mortgaged homes, or one in 24, were considered seriously underwater in the second quarter of 2021, with a combined estimated balance of loans secured by the property at least 25 percent more than the property’s estimated market value. That was down from 5.2 percent of all U.S. properties with a mortgage in the prior quarter and 6.2 percent, or one 16 properties, a year ago.

Across the country, 48 states saw equity-rich levels increase and seriously underwater percentages decrease from the first quarter to the second quarter 2021. Every state saw equity-rich levels rise and the seriously underwater portion drop compared to the second quarter of 2020.

The improvements at both ends of the equity scale were the largest in two years and provided yet another sign that the United States housing market has resisted damage to the broader economy brought about by the Coronavirus pandemic that hit early last year. As the economy has gradually recovered in 2021, the housing market boom has continued for a 10^th straight year, with gains across most measures.

Equity increases in the second quarter came as the median home prices nationwide rose 11 percent, quarterly, and 22 percent year over year, during the months running from April through June of 2021. Median vales rose up at least 15 percent annually in a majority of metro-area markets around the country. Those ongoing price runups have boosted equity because the increases have widened the gap between what homeowners owe on their mortgages and the value of their properties.

Prices have continued rising over the past year as rock-bottom interest rates and a desire to escape virus-prone areas have led to a bubble of home buyers largely untainted by the pandemic’s financial damage. Those buyers have been chasing a declining supply of properties for sale throughout the past year, resulting in elevated demand and soaring values.

“The huge home-price jumps over the past year that helped millions of sellers earn big profits also kicked in big-time during the second quarter for other owners who saw their typical equity improve more than at any time in the last two years. Instead of the virus pandemic harming homeowners, it’s helped create conditions that have boosted the balance sheets of households all across the country,” said Todd Teta, chief product officer with ATTOM. “There are still a lot of questions hanging over the near future of the U.S. housing market, with some connected to how well the economy keeps recovering from the pandemic, and some not. We’ll keep watching those closely, though for now, there are few assets that keep on giving so much as homeownership.”

States where the share of equity-rich homes decreased or went up the least from first to the second quarter of this year were Maryland (down from 23.5 percent to 23.2 percent), West Virginia (remained at 19.8 percent), Nebraska (up slightly from 27 percent to 27.1 percent), Alaska (up slightly from 22.5 percent to 22.9 percent) and Montana (up slightly from 40.4 percent to 40.8 percent).

South and West show largest declines in underwater properties

Seven of the 10 states with the biggest declines from the first quarter of 2021 to the second quarter of 2021 in the percentage of mortgaged homes considered seriously underwater were in the South and West. They included Tennessee (share of mortgaged homes seriously underwater down from 10.1 percent to 4.4 percent), Alabama (down from 12.1 percent to 6.6 percent), Delaware (down from 9.9 percent to 4.6 percent), Alaska (down from 7 percent to 3.1 percent) and Nebraska (down from 8.6 percent to 5 percent).

States where the percentage of seriously underwater homes rose or declined the least from the first to the second quarter of 2021 were West Virginia (up from 10.3 percent to 11.7 percent), New Hampshire (up from 2.4 percent to 2.5 percent), Hawaii (down from 2.5 percent to 2.3 percent), New York (down from 3.3 percent to 3.1 percent) and Utah (down from 2.2 percent to 1.9 percent).

Largest shares of equity-rich homes still in West; smallest in Midwest and South

The West again had far higher levels of equity-rich properties than other regions in the second quarter of 2021. Seven of the top eight states with the highest levels in the second quarter were in the West, led by Idaho (54.2 percent of mortgaged homes were equity-rich), California (53.8 percent), Vermont (53.3 percent), Washington (49.4 percent) and Utah (45.5 percent).

Fourteen of the 15 states with the lowest percentages of equity-rich properties in the second quarter of 2021 were in the Midwest and South, led by Louisiana (17.1 percent), Illinois (18.4 percent), Oklahoma (19.6 percent), West Virginia (19.8 percent) and Alabama (21.2 percent).

Among 106 metropolitan statistical areas with a population greater than 500,000, nine of the 10 with the highest shares of mortgaged properties that were equity-rich in the second quarter of 2021 also were in the West. They were led by San Jose, CA (69.4 percent equity-rich); San Francisco, CA (64.9 percent); Los Angeles, CA (57.9 percent); Boise, ID (57.4 percent) and San Diego, CA (54.3 percent). The leader in the Northeast region was Boston, MA (43.9 percent), while Austin, TX, again led the South (52.3 percent) and Grand Rapids, MI, continued to top the Midwest (37.2 percent).

The 15 metro areas with the lowest percentages of equity-rich properties in the second quarter of 2021 were in the Midwest and South, led by Baton Rouge, LA (13.5 percent of mortgaged homes were equity-rich); Columbia, SC (16.2 percent); Little Rock, AR (17.5 percent); Akron, OH (18.3 percent) and Tulsa, OK (18.4 percent).

All but one of the 106 metro areas analyzed (99 percent) showed an increase in levels of equity-rich homes from the first quarter of 2021 to the second quarter of 2021 while all 106 improved year-over- year.

Top equity-rich counties still clustered in San Francisco area

Among 1,536 counties that had at least 2,500 homes with mortgages in the second quarter of 2021, 17 of the top 20 equity-rich locations were in the West region. The highest concentration again was in the San Francisco Bay area of California.

Counties with the highest share of equity-rich properties were San Mateo County, CA (outside San Francisco) (74 percent equity-rich); Santa Clara County (San Jose), CA (70.2 percent); Dukes County (Martha’s Vineyard), MA (67.5 percent); Nantucket County, MA (66.4 percent) and Alameda County (Oakland), CA (66.2 percent)

Counties with the smallest share were Cumberland County (Fayetteville), NC (6.8 percent); Hoke County, NC (outside Fayetteville) (8.9 percent); Kanawha County (Charleston), WV (9 percent); Vernon Parish, LA (outside Alexandria) (9.2 percent) and Ascension Parish, LA (outside Baton Rouge) (9.4 percent).

At least half of all properties equity-rich in almost 1,200 zip codes

Among 8,255 U.S. zip codes that had at least 2,000 residential properties with mortgages in the second quarter of 2021, there were 1,172 where at least half of all homes with a mortgage were equity-rich.

Forty-seven of the top 50 were in California, again clustered in the San Francisco Bay area. They were led by zip codes 94024 in Los Altos, CA (83.5 percent of mortgaged properties were equity-rich); 94116 in San Francisco, CA (81.4 percent); 94707 in Berkeley, CA (81.2 percent); 94306 in Palo Alto, CA (80.6 percent) and 94122 in San Francisco, CA (80.4 percent).

Highest seriously underwater shares still in South and Midwest

The 10 states with the highest shares of mortgages that were seriously underwater in the second quarter of 2021 were in the South and Midwest, led by Louisiana (12.2 percent underwater), West Virginia (11.7 percent), Illinois (9 percent), Arkansas (8.8 percent) and Iowa (8.4 percent). The smallest percentages were in the West, led by California (1.4 percent), Washington (1.5 percent), Oregon (1.6 percent), Arizona (1.7 percent) and Utah (1.9 percent).

Among 106 metropolitan statistical areas with a population greater than 500,000, those with the largest shares of mortgages that were seriously underwater in the second quarter of 2021 were Baton Rouge, LA (12.7 percent); Toledo, OH (10.3 percent); Youngstown, OH (9.6 percent); Akron, OH (9.6 percent) and New Orleans, LA (9.4 percent).

Among the 106 metro areas, 101 (95 percent) showed a decrease in levels of seriously underwater properties from the first to the second quarter of 2021; just five (5 percent) showed an increase. Seriously underwater rates dropped, year over year, in all 106.

At least 25 percent of residential properties seriously underwater in just 33 zip codes

Among 8,255 U.S. zip codes that had at least 2,000 homes with mortgages in the second quarter of 2021, there were only 33 locations where at least 25 percent of all properties with a mortgage were seriously underwater. The largest number of those zip codes were in Cleveland, OH; Akron, OH; Toledo, OH and St. Louis, MO.

The top five zip codes with the largest shares of seriously underwater properties in the second quarter were 25705 in Huntington, WV (56.1 percent of mortgaged homes were seriously underwater); 44110 in Cleveland, OH (52.6 percent); 71730 in El Dorado, AR (52.4 percent); 44105 in Cleveland, OH (48.4 percent) and 44112 in Cleveland, OH (46.7 percent).

Report methodology

The ATTOM U.S. Home Equity & Underwater report provides counts of properties based on several categories of equity — or loan to value (LTV) — at the state, metro, county and zip code level, along with the percentage of total properties with a mortgage that each equity category represents. The equity/LTV is calculated based on record-level loan model estimating position and amount of loans secured by a property and a record-level automated valuation model (AVM) derived from publicly recorded mortgage and deed of trust data collected and licensed by ATTOM Data Solutions nationwide for more than 155 million U.S. properties. The ATTOM Home Equity and Underwater report has been updated and modified to better reflect a housing market focused on the traditional home buying process. ATTOM found that markets where investors were more prominent, they would offset the loan to value ratio due to sales involving multiple properties with a single jumbo loan encompassing all of the properties. Therefore, going forward such activity is now excluded from the reports in order to provide traditional consumer home purchase and loan activity.

Definitions

Seriously underwater: Loan to value ratio of 125 percent or above, meaning the property owner 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 property owner had at least 50 percent equity.