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M REPORT | 53 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 Ten Quarters of Equity Gains Come to a Close While home equity levels remained relatively flat, equity-rich properties now make up 48% of all mortgaged properties. A s final bits of year-end data covering 2022 flow in, ATTOM Data's fourth-quarter Home Equity & Underwater Report revealed that 48% of residen- tial mortgaged properties were considered equity rich, a slight decline from the third quarter of 2022 when that same number stood at 48.5% and up from the same period in 2021 at 41.9%. According to ATTOM, equity- rich levels have essentially dou- bled compared to pre-pandemic levels. The decline experienced in the fourth quarter reversed a run of 10 straight quarterly gains as the portion of equity-rich mortgage payers went down in 31 states. ATTOM explains this dip could be one of the first signs of how falling home prices have started to affect homeowners following a decade-long housing market boom. Although the number of equity- rich mortgages has increased, the report also revealed that 2.9% of mortgaged homes, or 1-in-34 housing units, were considered seriously underwater in the fourth quarter of 2022. This figure is unchanged from the third quarter of 2022 and is down from 3.1%, or 1-in-32 properties a year earlier. In total, 94.1% of homeown- ers had some sort of equity built up in their properties during the fourth quarter; this number is slightly down from 94.3% but up from 93.5% a year prior. The por- tion of homeowners with equity rises further when accounting for homeowners who have paid off their home loans. "Dents are beginning to surface in the armor around the U.S. housing market after 11 years of a strong showing for owners," said Rob Barber, CEO of ATTOM. "Home values have been drop- ping since the middle of last year, which appears to be starting to cut into homeowner equity around the country." "That's probably happening because values are sinking faster than owners are paying off their mortgages," Barber continued. "How that shakes out over the next few months will depend on a lot of factors, including where interest rates go. But for now, it looks like the runup in wealth flowing from owning homes has stalled along with the market." Among the major regions of the country, the West saw the biggest drops in home equity levels. The fourth-quarter declines were led by Idaho (the portion of mort- gages homes considered equity- rich decreased from 65.8% in the third quarter of 2022 to 61.6% in the fourth quarter of 2022), Arizona (down from 63.4% to 59.9%), Nevada (down from 55.8% to 52.3%), Washington (down from 61% to 58.5%), and Oregon (down from 55% to 53.2%). Conversely, the South had the biggest increase in the share of equity-rich homes during the fourth quarter. According to ATTOM, while the portion of mortgage homes considered seriously underwater remained historically low in the fourth quarter of 2022 in most of the nation, the largest increases were clustered in the West. The top increases were in Missouri (share of mortgaged homes that were seriously underwater up from 5.2% in the third quarter of 2022 to 7.1% in the fourth quar- ter), Hawaii (up from 1.5% to 2%), Idaho (up from 1.9% to 2.2%), New Mexico (up from 2.7% to 3%), and Wyoming (up from 2.9% to 3.2%). Among 8,721 U.S. ZIP codes that had at least 2,000 residential properties with mortgages in the fourth quarter of 2022, there were 3,887 (46%) where at least half the mortgaged properties were equity rich. The Midwest and South again had the top 10 states with the highest shares of mortgages that were seriously underwater in the fourth quarter of 2022. The top five were Louisiana (10.6% seri- ously underwater), Missouri (7.1%), Mississippi (6.8%), Illinois (6.3%), and Iowa (6.2%). ATTOM further found that only about 234,400 homeowners were facing possible foreclosure in the fourth quarter of 2022, or just four-tenths of one percent of the 58.1 million outstanding mortgages in the United States. Of those facing foreclosure, about 216,000— or 92%—had at least some equity built up in their homes. "Facing foreclosure is not nearly as impactful as it could be for the vast majority of homeowners because they have varying levels of financial cushion built up in their property," Barber concluded. "That should help them either re- finance mortgages or, if they have to sell, still generate a profit from all the recent price increases."