U.S. Home Equity Sees Slight Decline in Q1 2025 but Remains Sturdy

Home Equity Trends: Q1 2025 Analysis

The latest findings from ATTOM, a respected source of land and property data, have shed light on the state of home equity in the United States for the first quarter of 2025. Despite a slight decrease in the percentage of equity-rich homes, the overall health of the housing market remains robust.

Key Findings

As of Q1 2025, 46.2% of mortgaged residential properties in the U.S. were classified as equity-rich. This means that for homes in this category, the estimated combined amount of loan balances was no more than half of their estimated market value. This marks a decrease from 47.7% in Q4 2024, reflecting a gradual decline from a peak of 49.2% observed in Q2 2024. Nevertheless, during a historical perspective, this percentage stands nearly double what it was in early 2020.

Moreover, there has been a slight uptick in the rate of seriously underwater homes – those where the total balance of loans is at least 25% higher than the property's market value. This rate rose from 2.5% in the previous quarter to 2.8% in Q1 2025.

Rob Barber, CEO of ATTOM, addressed the situation, emphasizing that while the decline in equity-rich proportions is notable, it shouldn't cause alarm. He mentioned that historically, the first quarter tends to record the lowest figures for equity-rich homes before an expected rebound in the second quarter, as seen in previous years.

State by State Breakdown

The decrease in equity-rich homes was evident in 47 states and Washington D.C. when compared to the previous quarter. However, there is a silver lining: compared to the same period last year, 33 states reported an increase in the percentage of equity-rich homes. For instance, Connecticut saw an impressive rise from 42.2% to 48%, along with notable increases in New York and New Jersey.

Conversely, Florida demonstrated a significant drop, slipping from 54.4% to 49.3%, indicative of the changing dynamics in the housing market across states. Other states such as Utah, Arizona, and Colorado also experienced declines, reinforcing the notion that not every region thrives equally in the current economic landscape.

Tracking Surface Trends

On a broader spectrum, the proportion of seriously underwater homes has held steady between 2% and 3% since early 2023, with the latest figure standing at 2.8%. This figure remains less than half of the 6.6% recorded in the same quarter of 2020, providing continued reassurance for homeowners.

While 48 states noted an increase in seriously underwater percentages, it’s important to highlight that only 25 states experienced these rates climbing compared to the same time last year.

Interestingly, the Northeast continues to lead with the highest equity-rich percentages, with Vermont topping the charts at an impressive 85.8%. In stark contrast, Louisiana is caught at the bottom, with only 20.3% of homes classified as equity-rich.

Market Sentiment

Among metropolitan regions, cities in California, such as San Jose and Los Angeles, report some of the highest equity-rich rates compared to their counterparts. Despite a quarter-over-quarter decline in the proportion of equity-rich homes across nearly 90% of major markets, many areas still show resilience when viewed annually, echoing broader trends in the national real estate market.

In addition to these trends, the report highlights a more nuanced view of equity status in zip codes and counties, identifying areas where a majority of homes are equity-rich and others facing severe underwater conditions.

This dual narrative represents the current U.S. home equity landscape - characterized by pockets of growth amidst broader declines and a housing market that remains vibrant despite the occasional hiccup.

In conclusion, while Q1 2025 brought about a slight dip in home equity, the underlying strength of the U.S. housing market remains evident, promising a potentially favorable environment for recovery in the upcoming quarters.