Home Equity Ticks Downward Across U.S.

As home prices drop across most of the United States, the percentage of houses that are “equity rich” have declined with them.

After a streak of 131 consecutive months of year-over-year increases, the median sale price of existing homes was down 0.2% to $363,000 in February compared to a year ago, according to the National Association of Realtors.

Of mortgaged U.S. residential properties during the first quarter, 47.2% were considered equity rich, meaning the combined estimated amount of loan balances secured by those properties was no more than 50% of their estimated market value, according to real estate data curator ATTOM’s first-quarter 2023 U.S. Home Equity & Underwater Report. 

That’s down slightly from 48% in the fourth quarter last year. Although it’s twice the level of three years ago, the drop-off in the first three months of 2023 marked the second straight quarterly decline after 10 consecutive gains, according to the report.

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Although the equity downturn is small, it is the latest indicator of how a decline in home prices across much of the country is affecting homeowners following a decadelong market boom.

“Homeowners in the U.S. continue to sit in a far better position than they were just a few years ago, with historically elevated levels of wealth built up in their properties,” ATTOM CEO Rob Barber said. “However, the recent downturn in the housing market is chipping away at the bounty they reaped from a decade of price surges. Home equity has fallen modestly amid a larger slump in profits homeowners are getting when they sell.”

While Barber said it’s too soon to tell whether this is a long-term trend, he’s optimistic for a market turnaround this year.

“For now, though, various measures suggest that the best of the boom may be behind us,” he said.

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The biggest declines in equity-rich mortgages were in the Western U.S., led by Arizona, which dropped from 59.9% in the fourth quarter of 2022 to 56.4% in the first quarter of this year. Nevada dropped from 52.3% to 49%; Idaho declined from 61.6% to 58.5%; Utah was down from 60.3% to 58.1%; and Washington declined from 58.5% to 56.5%.

The South had four of the five states where the equity-rich share of mortgage homes increased. The largest increases were in New Mexico, up from 45.6% to 48.9%; Kentucky rose from 37.2% to 40.2%; Mississippi increased from 33.2% to 35%; Oklahoma was up from 35.2% to 36.4%; and South Carolina increased from 48.9% to 49.7%.

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