U.S. Home Equity Maintains Strong Position as Housing Market Thrives
Sustained Home Equity Amidst Market Resilience
In the fourth quarter of 2024, the U.S. housing market showcased remarkable stability, as reported by ATTOM, a prominent provider of property data and real estate analytics. The findings reveal that nearly 95% of homeowners hold significant property wealth, underlining the durability of home equity despite slight variations.
According to the report, 47.7% of mortgaged residential properties in the United States were identified as equity-rich, meaning their combined loan balances were no more than half of their estimated market values. This figure reflects a minor decline from 48.3% in the previous quarter but a notable increase from last year’s 46.1%. The persistence of equity-rich homes signifies a continued benefit from the prolonged housing market boom spanning over 13 years.
Rob Barber, CEO of ATTOM, indicated that the latter part of 2024 represented a holding pattern typical of the slower autumn home-buying season. However, this period wasn’t detrimental for homeowners, as many benefit from record-high levels of equity thanks to relentless increases in home values. He emphasized that nearly half of all residential mortgage holders in the U.S. have paid off major portions of their loans, resulting in significant wealth available for various financial pursuits such as new home purchases or business ventures.
Trends Across the States
The report also examined how different regions fared, noting a general decline in equity-rich home mortgages across most states. While the equity-rich portion decreased in 33 out of 50 states, most declines were by less than two percentage points. Nevertheless, the portion remains remarkably higher than the 26.5% recorded in early 2020. Importantly, 41 states experienced annual growth in equity-rich properties.
States like Rhode Island led the annual growth in equity-rich homes, climbing from 54.6% in Q4 2023 to 60.8% in Q4 2024. Missouri and Connecticut also showcased notable improvements, indicating that low to mid-priced markets, especially in the Midwest and Northeast regions, are benefitting the most.
Conversely, some western states noted a slight drop; Florida, for example, saw the equity-rich share decline from 54.3% to 50.9%. Such trends highlight the mixed factors impacting the housing market as it navigates potential challenges and opportunities.
Underwater Mortgages
The stability of equity-rich homes corresponds with the rates of seriously underwater mortgages, which have remained low. Only 2.5% of mortgaged homes fell into this category in Q4 2024, indicating no significant changes from previous quarters. This statistic signifies a marked improvement compared to 2020 when nearly one in fifteen homes were categorized as seriously underwater.
The report elucidated that while 36 states witnessed a minor uptick in underwater mortgage rates, 34 states showed improvements year-on-year. For instance, Wyoming saw a substantial drop in its seriously underwater share, plummeting from 8.8% last year to just 2.4%.
Local Insights and Housing Markets
Focusing on metropolitan areas, the highest levels of equity-rich properties were observed in California. For example, cities like San Jose and Los Angeles recorded equity-rich levels of 68.5% and 64%, respectively. For larger metropolitan statistical areas, while 64% experienced a decline in equity-rich shares from the previous quarter, a remarkable 63% displayed year-on-year increases.
Furthermore, counties in the Midwest, especially Michigan and Wisconsin, established themselves as housing markets with potent equity-rich conditions. Chittenden County in Vermont led with an impressive 91.6% equity-rich status among mortgaged homes.
Conclusion
As the housing market transitions into Spring 2025, all eyes will be on how these patterns evolve. While the current inventory of equity-rich homes remains high, it will be crucial to observe how the market reacts with potentially changing economic conditions and buyer behavior. The upcoming months may provide vital insights that could significantly influence home equity trends going forward.
The ATTOM Home Equity report continues to serve as a valuable resource for understanding property equity dynamics and the broader housing market landscape, paving the way for homebuyers and investors alike to make informed decisions.