Equity-rich homes remain above historic levels, but gains are slowing

For most Americans their largest and most valuable single asset is their home, but how has the current housing market impacted their home equity?

A new report from property data curator ATTOM shows that slightly less than half of US homes with a mortgage were equity rich (48.3%) in the third quarter of 2024, down slightly from the previous quarter (49.2%). That means the loans secured on these homes amount to less than half of the homes’ estimated market value.

The housing market has been booming for more than a decade and despite elevated interest rates and the cost of living, prices have continued higher, although they have slowed in recent months. That said, year-over-year things remain on an upward trajectory and home equity has followed with the share of homes that are equity rich rising from 47.4% a year ago and high by historical levels.

The share of equity-rich homes increased in 38 of the 50 states on an annual basis, driven by low- and mid-tier homes in the Midwest and Northeast and led by Vermont at 86.4%. Western states were less positive with Utah posting the largest decrease of more than 4 percentage points to 52.4%.

"Homeowner equity typically mirrors home-price trends, and the third quarter of this year followed that pattern. Equity remained elevated as the value of residential properties has surged consistently over the years. However, it held steady this quarter, reflecting the cooling of earlier sharp price increases," said Rob Barber, CEO for ATTOM. "Despite the flat pattern, home equity keeps providing a significant boost to the economy in the form of financial leverage that tens of millions of households can use to finance major purchases or investments."

Barber expects some small fluctuations in home equity levels in the months ahead as the housing market enters its annual slow season.

InvestmentNews has been looking at the opportunities in the housing market with Larry Connor, managing partner at The Connor Group, speaking with anchor Gregg Greenberg.

ATTOM’s report shows that just 2.5% of mortgaged homes were seriously underwater in the third quarter, with combined estimated balances of loans secured by properties that are at least 25% more than those properties' estimated market values. That percentage was up slightly from 2.4% in the second quarter but the same as Q3, 2023.

The Midwest and South regions had 19 of the 20 states with the highest shares of mortgages that were seriously underwater in the third quarter of this year. The top five were Louisiana (10.1% seriously underwater), Mississippi (7.2%), Kentucky (5.5%), Arkansas (5.4%) and Iowa (5.2%).