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60 | M REPORT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Percentage of Underwater Homes Increase in More Than Half the U.S. Twelve of the 15 states with the biggest increases in the percentage of mortgaged homes considered seriously underwater from Q4 2021 to Q1 2022 were spread across the South and Midwest. A TTOM released its Q1 of 2022 U.S. Home Equity & Underwater Report, showing that 44.9% of mortgaged residen- tial properties throughout the United States were considered equity-rich in the first quarter, meaning that the combined esti- mated amount of loan balances secured by those properties was no more than 50% of their homes estimated market values. The portion of mortgaged homes that were equity-rich in the first quarter of 2022 inched close to half, up from 41.9% in Q 4 of 2021 and from 31.9% in Q1 of 2021. "Homeowners continue to benefit from rising home prices," said Rick Sharga, Executive VP of Market Intelligence for ATTOM. "Record levels of home equity provide financial security for mil- lions 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." The report shows that just 3.2% of mortgaged homes—or one in 31—were considered seriously underwater in Q1 of 2022, with a combined estimated balance of loans secured by the property of at least 25% more than the prop- erty's estimated market value. Across the country, 45 states saw equity-rich levels increase from Q 4 of 2021 to Q1 of 2022 while seriously underwater percentages increased in 28 states by less than 1%, respectively. Year over year, equity-rich levels rose in 48 states and seriously underwater portions dropped in 46 states. These equity trends came as the decade-long U.S. housing market boom continued from late 2021 into early 2022, although at a slower pace. Nationwide, the median home price rose 2% during that time, to yet another record of $320,500. That left it 17% ahead year over year nationally and up by at least 10% in most of the United States. Homeowner equity improved again in Q1 of 2022 as rising home prices widened gaps between what homeowners owed on their mortgages and the value of their properties. "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," Sharga said. "Rising interest rates, the highest infla- tion 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." The 15 states where the equity- rich share of mortgaged homes rose most from Q 4 of 2021 to Q1 of 2022 were all in the western and southern regions of the U.S. states, with the biggest increases in New Mexico, where the por- tion of mortgaged homes consid- ered equity-rich rose from 35.3% in Q 4 to 43.4% in Q1 of 2022. The highest levels of equity- rich properties around the United States remained in the West dur- ing the first quarter of 2022, with eight of the top 10 states located in that region. They were led by Idaho (68.8%), Vermont (68%), Utah (63.6%), Washington (60.9%), and Arizona (60.9%). "Positive equity should give financially distressed homeown- ers better options than their counterparts had during the Great Recession, when 33% of all homeowners were underwater on their mortgages," Sharga noted. "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." Twelve of the 15 states with the lowest percentages of equity-rich properties in the first quarter of 2022 were in the Midwest and South. The smallest portions were in Louisiana (21.6%), Mississippi (23.5%), Illinois (23.5%), Alaska (25.2%), and Wyoming (26.1%). Among the 107 metropolitan statistical areas around the nation with a population greater than 500,000, the 30 with the highest shares of mortgaged properties that were equity rich in Q1 of 2022 were in the West and South. The top five states with the highest share of mortgaged properties that were equity-rich were in: 1. San Jose, California (74.4%) 2. Austin (73.8%) 3. Boise, Idaho (70%) 4. San Francisco (68.1%) 5. Salt Lake City (65.2%) While Austin again led the South and San Jose led the West, the leader in the Northeast region was Portland, Maine at 52.1%, and the top metro in the Midwest continued to be Grand Rapids, Michigan at 49.1%. Despite the slight quarterly increase in the level of seriously un- derwater mortgages nationwide, the portion actually declined in 58% of the metro areas with enough data to analyze in both Q4 of 2021 and Q1 of 2022. Seriously underwater rates decreased, year over year, in 103 of those 107 metros. Only about 201,000 home- owners were facing possible foreclosure in Q1 of 2022, or just three-tenths of 1% of the 58.1 mil- lion outstanding mortgages in the United Sates. However, 180,000, or 90% of those facing possible lender takeover, had at least some equity built up in their homes. "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." —SRick Sharga, Executive VP of Market Intelligence, ATTOM