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Report: Equity rich mortgaged homes see third straight quarterly decline

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The number of mortgaged homes that are equity rich have declined for three consecutive quarters, and the portion of mortgaged homes considered “seriously underwater” increased, according to a new report by ATTOM, a leading curator of land, property and real estate data.

ATTOM’s first-quarter 2024 U.S. Home Equity & Underwater Report found that 45.8% of mortgaged residential properties in the United States “were considered equity-rich in the first 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 were equity-rich in Q1 2024 was down from 46.1% in Q4 2023, marking the third consecutive quarterly decline; and down from 47.2% in Q1 2023, hitting the lowest point in two years, the report found.

The portion of U.S. mortgaged homes that were considered “seriously underwater” increased slightly in the first few months of 2024 from 2.6% to 2.7% of all residential mortgages, the report found.

“Seriously underwater mortgages are those with combined estimated balances of loans secured by properties that are at least 25 percent more than those properties’ estimated market values,” it states.

“It’s too early to make any broad statements about the market direction, especially coming off the typically slower Fall and Winter months. But amid the recent trends, this year’s Spring buying season will be of heightened importance in telling us if there is a new long-term market pattern developing,” ATTOM CEO Rob Barber said of the findings.

ATTOM explains it analyzed “multi-sources property tax, deed, mortgage, foreclosure, environmental risk, natural hazard, and neighborhood data” for more than 155 million residential and commercial properties covering 99% of the U.S. population.

Data showing equity decline also occurred as the national median single-family home and condo value slipped 4% over the winter.

“When prices flatten out or drop, equity usually follows even as homeowners pay off mortgages. That’s because equity is based on mortgage debt as a portion of estimated property values,” the report states.

Heading into the spring buying season, the residential market “faces a mix of forces that could drive it back up or hold it steady,” ATTOM says, including fewer available homes for sale, a strong investment market, high mortgage rates of over 7% and inflated home prices “that remain a financial stretch for average wage earners.”

The portion of equity-rich mortgages decreased in 26 U.S. states from Q4 2023 to Q1 2024 and dropped over the year from Q1 2023 to Q1 2024 in 25 states.

The biggest quarterly declines of equity rich mortgages were seen in southern states, led by Kentucky, South Carolina and Georgia, according to the data.

The portion of mortgaged homes considered “seriously underwater” slightly increased nationwide, with the largest increases reported in the South, “which already had some of the nation’s highest levels of seriously underwater mortgages,” the report found. Kentucky, West Virginia, Oklahoma and Arkansas reported the highest increases.

Nine of the 10 states with the lowest percentages of equity-rich properties during Q1 2024 were in the Midwest or South, led by Louisiana, Oklahoma, Illinois and Kentucky.

The Midwest and South regions had nine of the top 10 states with the highest shares of mortgages that were seriously underwater in Q1 2024, led by Louisiana.

Twenty-three of the 25 counties with the smallest share of equity-rich homes in Q1 2024 were also in the South, led by Louisiana, the report found.

The findings come after another report found that home buyers in 2024 need 80% more income to purchase a home than they did in 2020, The Center Square reported.