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The share of homeowners in the United States whose mortgages are considered “seriously underwater” ticked up during the first quarter of 2024, according to a new report.
The share of seriously underwater mortgages moved up slightly from 2.6 percent to 2.7 percent in the first quarter, according to a report from Attom released Thursday. Attom defines homeowners as “seriously underwater” if the outstanding balance on their mortgage exceeds the estimated market value of their property by 25 percent or more.
Attom’s report also found that homeowner equity declined during the first quarter, with 45.8 percent of mortgaged properties in the United States considered equity-rich, down from 46.1 percent in the fourth quarter of 2023.
The decline in equity — which is still at relatively high levels — comes as the housing market cools down from its post-pandemic highs. Equity has declined for three straight quarters, reaching its lowest point in two years during the first quarter of 2024.
The national median single family home and condo value slipped 4 percent during the winter and was up just 3 percent annually during the quarter. When prices drop, equity tends to follow.
“Homeowner balance sheets continue to benefit in a huge way from the boom times in the form of elevated equity that can be used to help finance all kinds of things, from home renovations to business startups. Still, the windfalls are starting to erode bit by bit amid mounting signs that the market is no longer so super-heated,” said Rob Barber, CEO of Attom.
“It’s too early to make any broad statements about the market direction, especially coming off the typically slower Fall and Winter months. But amid the recent trends, this year’s Spring buying season will be of heightened importance in telling us if there is a new long-term market pattern developing.”
The share of equity-rich mortgages decreased in 26 of 50 states, with the biggest quarterly declines led by states in the South. Kentucky took the top spot for declines, with the portion of mortgaged homes considered equity-rich dropping to 28.7 percent from 35.4 percent in the final quarter of 2023. The counties with the highest share of equity-rich homes were found in the Northeast and Midwest, led by Burlington, Vermont, where 88.6 percent of homes were considered equity-rich.
Thirty-seven states saw the share of seriously underwater mortgages increase as well, with Kentucky again in front with the share of underwater mortgages rising from 6.3 percent in the fourth quarter to 8.3 percent in the first quarter of 2024.
According to the Attom report, the spring market is likely to either drive equity back up or hold it steady, with low housing inventory and a strong investment market, plus mortgage rates that have climbed above 7 percent, holding back many aspiring homebuyers.
