Getting a seat at the table is tough, but millions of people who placed their money in the housing market are seeing their bets pay off. Despite rising interest rates, home values remain high with the national median price for a single-family home surpassing $300,000. Concerns about inflation and home affordability have grown more common. However, the fourth quarter of 2021 saw some of the biggest improvements in the financial position of mortgage payers who were already equity-rich or even underwater on their loans.
A home is considered equity-rich if the debt secured by the property is equal to half or less of the property’s estimated market value. A home valued at $300,000 would have a maximum of $150,000 in debt to meet the threshold.
Another thing that is helping homeowners gain equity is that people seem to be more reluctant to borrow against their homes, says Daren Blomquist, senior vice president with ATTOM Data Solutions. “People are gradually starting to tap their home equity more, but much more conservatively than what we were seeing 12 years ago during the last housing boom,” Blomquist says. “Folks are not treating their homes as ATMs.”
States with the most equity
Nine of the top ten states with the highest percentage of equity-rich properties were in the West according to a report from ATTOM.
The top states were:
- Idaho: 66.7%
- Vermont: 64%
- Utah: 62.5%
- Washington: 58.6%
- Arizona: 57.6%
Places with particularly high home equity levels are generally considered expensive for buyers.
“Rising home prices are a double-edged sword,” Blomquist says. “For homeowners, it means more home equity wealth. But it can also mean worsening affordability. That can be bad news for people who aren’t homeowners yet and that want to become homeowners.”
States with the most improved home equity
While the Western US leads when it comes to the most equity-rich homes, it shares the title with some southern states for the markets where homeowners have seen the greatest improvements in their equity. Thirteen of the fifteen states that saw the largest increases in equity-rich homes were in the West and South.
The most improved regions between the third and fourth quarters of 2021 were:
- Tennessee: 41.4% to 47.2%
- North Carolina: 38.6% to 44.2%
- Nevada: 44.9% to 49.9%
- Georgia: 35.3% to 40.1%
- Arizona: 53.2% to 57.6%
States most seriously underwater
Lady Luck hasn’t been kind to all homeowners. Many remain seriously underwater on their loans.
To be considered seriously underwater, the collective debt load secured by the property is at least 25 percent higher than the property’s estimated market value. A home valued at $300,000 would be carrying a minimum of $375,000 in debt.
The South and Midwest continue to have the highest share of homeowners seriously underwater on their loans:
- Wyoming: 14.3%
- Mississippi: 12.2%
- Louisiana: 10%
- Illinois: 7.1%
- Iowa: 7%.
However, these numbers are marked improvements from the 2018 report where 21.7% of homeowners in Louisiana and 16.8% in Mississippi were seriously underwater.
States with the highest increases of underwater homeowners
Some states saw homeowners sink deeper underwater on their loans. Wyoming was home to the greatest increase in homeowners seriously underwater on their loans with a rise from 11.5% to 14.3% between the third and fourth quarter of 2021. The next-worst state was Connecticut (3.8% to 4.3%).
A few other states, including Arizona (1.3% to 1.4%), (Utah 1.23% to 1.24%) saw incredibly small increases in the percentage of homeowners seriously underwater.
Trends of equity-rich cities largely followed the trends for states with the West and South being home to the top twenty metropolitan statistical areas for equity-rich homes:
- Austin, TX: 70.6%
- Boise, ID: 67.3%
- San Jose, CA: 66.1%
- Spokane, WA: 64.1%
- Salt Lake City, UT: 64%
- Boston, MA: 50.6%
- Grand Rapids, M: 46.6%
The South was also home to the metro regions with the most underwater homes. In Jackson, MS just 17.1% of homes were equity rich, followed by Baton Rouge, LA with 17.5%.
As the financial landscape of the United States changes, different states are likely to see varied numbers of home equity. These are often reflected in the prices of real estate and financial stability of homeowners. Even if you live in a place where home equity does not have a high percentage, you can still take some steps to improve your home equity over time.