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Foreclosures Less Likely with Few Homes Underwater

Underwater homeowners – they owe more on their mortgage than their home’s value – are more likely to end up in foreclosure. But today, 1 in 3 owners with a mortgage (32%) have at least 50% equity, and only 1 in 21 (4.7%) owes 25% or more than their home’s current market value.

IRVINE, Calif. – Thanks in part to rising property values, today’s homeowners largely have a lot more equity than they did during the housing meltdown in the Great Recession. Of those with a mortgage, one in three (31.9%) is equity rich, according to ATTOM Data Solutions’ first-quarter 2021 U.S. Home Equity & Underwater Report, meaning that the remaining amount on the owner’s mortgage is 50% or less than their home’s estimated market value.

The report only analyzes homes in which the homeowner has a mortgage. Those without a mortgage generally have 100% equity.

On the flipside, a smaller amount of homeowners with a mortgage are underwater now compared to the Great Recession. Nationally, just 2.6 million – one in 21 or 4.7% of all mortgage properties – were considered seriously underwater in the first quarter of 2021, meaning the amount they still owe on the home is at least 25% more than its estimated market value.

That 4.7% of mortgaged homes seriously underwater is down from 5.4% in the prior quarter, 6% in the third quarter of 2020 and 6.6% a year ago.

On the other hand, the percentage of equity rich homes, 31.9%, is up from previous quarters – 30.2% in the fourth quarter of 2020, 28.3% in the third quarter and 26.5% in the first quarter of 2020.

Overall, Florida was about average when ATTOM compared states. Among the 50 states, 41 had an increase in equity-rich homes compared to the previous quarter, and 49 saw a decrease in the percentage seriously underwater.

“It continues to be a great time to be a homeowner most everywhere in the country, says Todd Teta, chief product officer with ATTOM Data Solutions. “The ongoing price spikes we’re seeing help to cut down the number of seriously underwater properties and boost the level of equity-rich properties.”

Teta says current trends may shift, however, once the foreclosure moratorium is lifted, something he says ATTOM is watching. “For now, though, the equity picture remains one of many signs that the long U.S. housing market boom keeps charging ahead.”

 

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