As is to be expected due to rising home prices, the number of homeowners who were “underwater” on their mortgages shrank considerably during 2016, according to ATTOM Data Solutions Year-End 2016 U.S. Home Equity and Underwater Report.
The report shows that as of the end of the year, about 5.4 million properties in the U.S. were “seriously underwater” – which is where the combined loan amount secured by the property was at least 25% higher than the property’s estimated market value. That’s a decrease of more than 1 million properties compared with 2015.
The 5.4 million “seriously underwater” properties represented about 9.6% of all U.S. properties with a mortgage – down from 10.8% compared with the end of the third quarter and down from 11.5% compared with the end of 2015.
It was the lowest level of “seriously underwater” properties since ATTOM Data Solutions began tracking it in 2012.
On the flip side, about 13.9 million properties had “equity rich” status – which is where the combined loan amount secured by the property was 50% or less of a property’s estimated market value. That’s an increase of nearly 1.3 million properties compared with 2015.
Those 13.9 million “equity rich” properties represented about 24.6% of all U.S. properties with a mortgage – up from 23.4% compared with the end of the third quarter and up from 22.5% compared with the end of 2015.
“Since home prices bottomed out nationwide in the first quarter of 2012, the number of seriously underwater U.S. homeowners has decreased by about 7.1 million, an average decrease of about 1.4 million each year,” explains Daren Blomquist, senior vice president with ATTOM Data Solutions, in a statement. “Meanwhile, the number of equity-rich homeowners has increased by nearly 4.8 million over the past three years – a rate of about 1.6 million each year.
“Despite this upward trend over the past five years, the massive loss of home equity during the housing crisis forced many homeowners to stay in their homes longer before selling, effectively disrupting the historical domino effect of move-up buyers that feeds both demand for new homes and supply of inventory for first-time home buyers,” Blomquist adds. “Between 2000 and 2008, our data shows the average homeownership tenure nationwide was 4.26 years, but that average tenure has been trending steadily higher since 2009, reaching a new record high of 7.88 years for homeowners who sold in 2016.”
States with the highest shares of seriously underwater properties included Nevada (19.5%); Illinois (16.6%); Ohio (16.3%); Missouri (14.6%); and Louisiana (14.5%).
Metropolitan areas with the highest shares of seriously underwater properties included Las Vegas (22.7%); Cleveland (21.5%); Akron, Ohio (20.1%); Dayton, Ohio (20.0%); and Toledo, Ohio (19.9%).
States with the highest shares of equity-rich properties at the end of 2016 were Hawaii (37.8%), Vermont (36.9%), California (36.0%), New York (34.9%) and Oregon (32.0%).
Metropolitan areas with the highest shares of equity-rich properties were San Jose, Calif. (51.6%); San Francisco (47.7%); Honolulu (39.8%); Los Angeles (39.2%); and Pittsburgh (35.8%).