Nearly 50% of financed american homes now worth double their loan amount
For many homeowners with mortgages, a long-term financial goal is to have a fully paid-off home.
Thanks in part to this hypercharged home market, nearly half of these homeowners are now closer to the finish line than the starting point.
In the final months of 2021, home price growth left 42 percent of homeowners in an equity-rich position, meaning their home’s value on the market was at least double the amount of their remaining loan balance, according to the latest report from Attom Data Solutions.
At the same point the previous year, only 30 percent of properties with a mortgage had eclipsed this threshold.
This represents a big boost for homeowners throughout most of the country, Attom Chief Product Officer Todd Teta said in the report. But he added that the upward trend in home equity may not continue forever.
“No doubt, there are market metrics that pose warnings about how long the boom can last and equity can keep improving,” Teta said in the report. “We keep watching those closely. But for now, homeowners are sitting pretty as the wealth they have tucked away in their homes keeps growing.”
The rising tide of home prices has also lifted the prospects of homeowners who were previously considered “seriously underwater” on their homes. This group has shrunk by nearly half over the last year, according to the report.
In the fourth quarter of the year, 3.1 percent of homeowners had loans that exceeded their home value by at least 25 percent, according to the report. During the same period the year before, that group represented 5.4 percent of properties with a mortgage.
While conditions have been good for existing homeowners and their net worth, there are signs that price growth may weaken in the future as well. The report highlights declines in home affordability and investor profits, as well as the prospect of further inflation and interest rate hikes.
The regions with the highest concentrations of equity-rich homeowners were largely located in the western United States. Idaho led the way, with more than two-thirds of its mortgaged properties worth double the loan amount. Utah featured the next-highest share of equity-rich homes, with the states of Washington and Arizona close behind.
Vermont was the lone state from outside the West that appeared in the Top 10.
Meanwhile, states in the Midwest and South were more mortgage-dependent. In Illinois, fewer than 1 in 4 mortgaged properties were equity-rich — the lowest share in the nation. Louisiana nearly matched that percentage, with Alaska, Wyoming and Mississippi not much better off.
Still, despite some regions starting from a more enviable position than others, the gains were felt broadly by homeowners throughout the country.
The share of equity-rich properties grew in 48 states from the third quarter of 2021 to the fourth quarter. The portion of properties that were seriously underwater dropped in 46 states in the same span.