American Equity Shoots Up In Q1 2022

Just under half of all mortgaged residential properties in the U.S. were considered equity-rich in Q1 2022, up to 44.9% from 41.9% in Q4 2021 and 31.9% in Q1 2021, according to a new report from ATTOM.

ATTOM’s U.S. Home Equity and Underwater Report shows that only one in 31 homes (3.2%) were considered seriously underwater in Q1 2022, about the same from last quarter but down significantly from 4.7% the year prior.

“Homeowners continue to benefit from rising home prices,” said Rick Sharga, Executive Vice President of Market Intelligence for ATTOM. 

“Record levels of home equity provide financial security for millions of families, and minimize the chance of another housing market crash like the one we saw in 2008. But these higher home prices and rising interest rates make it extremely challenging for first-time buyers to enter the market.”

Forty-five states saw equity-rich levels increase. Though most of those states saw less than a 1% increase, it shows that equity continues on its upward trajectory in the U.S. Seriously underwater portions dropped in 46 states. 

Southern and Western states saw the biggest increases in equity-rich properties. New Mexico saw the largest jump in Q1, from 35.3% of mortgaged homes being classified as equity-rich in Q4 2021 to 43.4%. Florida took second place (53.6%), then California (60.5%), South Carolina (41.2%), and Montana (45.7%).

“It’s likely that equity will continue to grow through the rest of 2022, although home price increases should moderate as the year goes on,” Sharga said. 

“Rising interest rates, the highest inflation in 40 years, and the ongoing supply chain disruptions due to the war in Ukraine are likely to weaken demand and slow down home price appreciation.”

Some analysts consider sky-high equity a stronghold against a 2008-style housing market crash. Americans are worried that bidding wars and historically low affordability will result in history repeating itself. But the $3.2 trillion in equity gained just in 2021 may prevent the wave of foreclosures that led to the Great Recession.

“The housing market is in a much stronger position compared with a decade ago,” Odeta Kushi, First American’s deputy chief economist, told Business Insider. “Accompanied by more rigorous lending standards, the household debt-to-income ratio is at a four-decade low and household equity near a three-decade high.”