Equity Rich

One in four U.S. properties is “equity rich

Rising home values and longer homeownership tenures led to a higher share of "equity rich" homeowners in the United States in the second quarter of 2017, according to the real estate data company RealtyTrac. Nearly one in four homeowners had the potential to borrow a considerable amount of money on a home equity loan or make a tidy profit in a sale.

RealtyTrac defines equity rich properties as having a combined loan amount of 50 percent or less of the property's estimated market value. The company calculated that approximately 14.04 million properties met this definition, or 24.6 percent of all mortgaged residences in the nation.

This share was up from 24.3 percent in the first quarter of the year and 22.1 percent in the second quarter of 2016. The total number of equity rich properties was up by 320,000 from the first quarter and 1.6 million from the previous year.

"An increasing number of U.S. homeowners are amassing impressive stockpiles of home equity wealth, enjoying the benefits of rapidly rising home prices while staying conservative when it comes to cashing out on their equity. Homeowners are staying in their homes nearly twice as long before selling as they were prior to the Great Recession, and the volume of home equity lines of credit are running about one-third of the level they were at during the last housing boom," said Daren Blomquist, senior vice president of RealtyTrac parent company ATTOM Data Solutions. "However, this home equity is unevenly distributed across different geographies, value ranges, occupancy statuses, and lengths of ownership, with a disproportionately high equity rich share among high-end properties, investor-owned properties, and properties owned for more than 20 years."

Forty-four percent of properties with an estimated market value above $750,000 were considered equity rich. This share fell to 29.6 percent for those valued at $300,000 to $750,000, 21 percent for those valued at $100,000 to $300,000, and 15.5 percent of those valued under $100,000.

Among properties that had been owned for 20 years or more, 25.7 percent were equity rich. Just 10 percent of those that had been owned for less than a year were equity rich.

Investment properties had slightly better equity than owner-occupied residences. A total of 27.1 percent of investment properties were equity rich during the quarter, compared to 23.8 percent of owner-occupwied homes.

Hawaii had the highest share of equity rich properties, with 38.3 percent of mortgaged properties in the state having at least 50 percent equity. Other states with a high share of equity rich properties included California (36.6 percent), New York (34.2 percent), Vermont (33.5 percent), and Oregon (32.2 percent).

The busy real estate market in the West was creating a high share of equity rich properties in cities, especially in California. San Jose had the highest equity share among 91 metropolitan statistical areas with a population of at least 500,000, with 52 percent of homes having at least 50 percent equity. This was followed by San Francisco at 47 percent and Los Angeles at 40 percent. Honolulu and Portland, Ore., also had high shares of equity rich properties at 40 percent and 35 percent, respectively.

Of the 7,192 ZIP codes with at least 2,500 people, Pittsburgh had the highest equity rich share at 74.4 percent. Several neighborhoods around New York City also had high equity rich shares, including two ZIP codes in Brooklyn with shares of 74.2 percent and 71.6 percent and one in Flushing with 71.1 percent.

On the other end of the spectrum, RealtyTrac determined that 5.43 million homes— or 9.5 percent of all mortgaged properties— were seriously underwater. The company defines a seriously underwater home as one where the combined loan amount is at least 25 percent higher than the estimated market value.

The total number of seriously underwater homes fell by 64,000 from the first quarter of the year and 1.2 million from the second quarter of 2016. The share of seriously underwater homes was down from 11.9 percent in the second quarter of 2016 and 9.7 percent in the first quarter of 2017.

Nevada had the highest share of seriously underwater properties at 17.4 percent, with a Las Vegas ZIP code posting the highest share of seriously underwater properties at 69.9 percent. Other states with a high share of seriously underwater properties included Louisiana (17.1 percent), Illinois (16.8 percent), Ohio (16.5 percent), and Indiana (16.4 percent).

Two neighborhood in Detroit were among the ZIP codes with the highest share of seriously underwater properties, with one coming in at 69.1 percent and the other at 67.5 percent. Other ZIP codes with a high share of seriously underwater homes were located in Park Forest, Ill. (68.4 percent) and Trenton, N.J. (68 percent).

Less valuable properties were more likely to be seriously underwater, with 30.4 percent of those valued under $100,000 being underwater by at least 25 percent. By comparison, 9.1 percent of those valued at $100,000 to $300,000, 4.9 percent of those valued at $300,000 to $750,000, and 4.7 percent of those valued over $750,000 were seriously underwater.

A home was most likely to be seriously underwater if it was purchased in the years leading up to the Great Recession. A total of 11.7 percent of mortgaged residences owned for 10 to 15 years were seriously underwater, compared to just 7.2 percent of those owned for 20 years or more.

Despite accounting for a large share of equity rich properties, investment properties were also more likely to be seriously underwater. Nearly one in five—19.2 percent—fell into this category, compared to just 6.8 percent of owner-occupied properties.