The reason why more homeowners were considered 'equity rich' in 2022's first quarter

More Americans were considered "equity rich" in the first quarter of 2022 — meaning that they owed no more than 50% of their home's total value — amid a rise in home prices, according to new data from ATTOM Data Solutions.

The number of equity-rich homeowners grew to 44.9% of mortgage holders in the first quarter, up from 41.9% in the fourth quarter of 2021 and 31.9% in the first quarter of 2021, according to the company's first-quarter 2022 U.S. Home Equity and Underwater Report. 

The latest home-price data shows that home values increased by nearly 20% annually in February, according to the S&P CoreLogic Case-Shiller U.S. National Home Price Index. In some cities, the increases were even higher; in Phoenix, Arizona, home prices rose 32.9%. 

"Homeowners continue to benefit from rising home prices," ATTOM Executive Vice President of Market Intelligence Rick Sharga said. "Record levels of home equity provide financial security for millions of families and minimize the chance of another housing market crash like the one we saw in 2008. But these higher home prices and rising interest rates make it extremely challenging for first-time buyers to enter the market."

If you are interested in taking advantage of high home values and want to potentially lower your mortgage rate, you could consider a cash-out refinance to pull money out of your home. Visit Credible to find your personalized interest rate without affecting your credit score.

NEARLY THREE-QUARTERS OF US METROS SEE DOUBLE-DIGIT HOME PRICE INCREASES IN Q1 2022: NAR DATA

Amount of seriously underwater homes drops from a year ago

Although many homeowners are seeing all-time-high home values, others are struggling, as what they owe on their mortgage is higher than the current value of their home. ATTOM data indicated that 3.2% of mortgaged homes — one in every 31 homes — were considered seriously underwater in the first quarter of 2022.

Seriously underwater occurs when the loan for a property is 25% higher than the property’s estimated market value. The 3.2% of homes that fell into this category, according to the report, was up just slightly from 3.1% of homes with a mortgage in the fourth quarter of 2021.

However, it's still down significantly from 4.7% of homes — or one in 21 properties — a year ago. 

Across the U.S., the number of equity-rich levels of mortgages rose in 48 states, ATTOM's report found, while the portion of seriously underwater homes decreased in 46 states.

If you are interested in pulling cash out of your home, or if you need to pay your mortgage down faster, consider refinancing your mortgage to lower your interest payment. Visit Credible to compare multiple mortgage lenders at once and choose the one with the best interest rate for you.

HOME PRICE GROWTH SPEEDS UP IN FEBRUARY WITH 19.8% ANNUAL GAIN, DATA SHOWS

Home equity gains could rise in year ahead, economist says

Across the U.S., the median home price increased 2% from late 2021 into early 2022, according to ATTOM’s report, rising to a new record of $320,500. This is up 17% from the year before and up by at least 10% in most of the U.S. 

Though home price gains are up, Sharga says that they could be unlikely to slow in the year ahead. The first quarter's elevated home prices came amid a surge among homebuyers who rushed to purchase a home amid tight supply. 

"It’s likely that equity will continue to grow through the rest of 2022, although home price increases should moderate as the year goes on," he said. "Rising interest rates, the highest inflation in 40 years, and the ongoing supply chain disruptions due to the war in Ukraine are likely to weaken demand and slow down home price appreciation."

Even homeowners who are facing foreclosure could have some equity. In fact, of the homes facing foreclosure and possible lender takeover, 90% have at least some equity built up in the home, ATTOM's report showed.

"Positive equity should give financially distressed homeowners better options than their counterparts had during the Great Recession, when 33 percent of all homeowners were underwater on their mortgages," Sharga said. "Hopefully these borrowers will be able to tap into their equity to refinance their debt, or be able to leverage it to sell their property and get a fresh start."

If you are interested in tapping into the equity in your home, contact Credible to speak to a home loan expert and get all of your questions answered.

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