Rapidly rising home prices are bad news for potential buyers, but they’re proving to be quite a boon to homeowner equity.
That’s according to a new report ATOM Data Solutions The study found that 49.2% of mortgaged homes in the second quarter of 2024 were “equity rich,” meaning the loan balance was less than half the estimated market value of those homes.
This is an increase of 3.4 percentage points from the first quarter of 2024, breaking three consecutive quarters of decline.
Additionally, the number of homes with mortgage balances exceeding 25% of the property’s estimated market value (or “severely underwater”) fell to 2.4% from 2.7% in the first quarter of 2024. This is the lowest level since at least 2019.
“With some of the sharpest home price gains in recent years, homeowner wealth improved significantly in the second quarter,” ATOM CEO Rob Barber said in the report. “After a period in which the stock market appeared to be stagnant or even declining, , another piece of good news for homeowners as the housing market continues to boom, with the supply of homes for sale remaining limited and buyer demand typically increasing in the summer, if home values move higher and drive equity gains. Not surprising.
Relatively cheaper markets in the South and Midwest fueled the gains. Kentucky had the largest quarterly increase in equity-rich homes, rising from 28.7% to 34.7%. The next highest percentage points gains were in Illinois (7.8 points), Missouri (7.2 points), Oklahoma (6.4 points) and Alabama (6.2 points).
However, Southern and Midwestern states also have the highest percentage of homes severely underwater, including Louisiana (10.5%), Mississippi (6.8%), Kentucky (6.3%), Arkansas (5.4%), and Iowa (5.2%). The states with the lowest proportions of severely underwater mortgages are Vermont (0.7%), Rhode Island (0.9%), New Hampshire (1%), Massachusetts (1.1%) and California (1.2%) .
States with the highest share of equity-rich mortgages are Vermont (83.5%), Maine (61.5%), New Hampshire (61.1%), Montana (61.1%), and Rhode Island (60.2%).
There are other notable trends in the report. The share of equity-rich homes increased in 48 states between the first and second quarters. Compared with the same period last year, 31 states’ shares increased, but the national share remained unchanged at 49.2%.
