ATTOM Data Solutions released its Q3 2021 U.S. Home Equity & Underwater Report This Week in Real Estate showing 39.5 percent of residential properties with a mortgage are equity rich. That means the property has an estimated market value greater than 50 percent of the mortgage balance(s), up from 28.3 percent compared to the same time period one year earlier. On the other end of the equity scale, just 3.4 percent of mortgaged homes were considered seriously underwater, meaning loan balances of at least 25 percent more than the property’s estimated value, which is down from 6 percent a year ago. The growth in properties considered equity rich and the decline in properties considered seriously underwater over the past year summarizes just how strong the housing market has performed. Below are a few newsworthy events from the second week of November that influence our business:
Home Equity Abounds Across U.S. During Third Quarter as Home Values Hit New Highs. ATTOM today released its third-quarter 2021 U.S. Home Equity & Underwater Report, which shows that 39.5 percent of mortgaged residential properties in the United States were considered equity-rich in the third quarter, meaning that the combined estimated amount of loan balances secured by those properties was no more than 50 percent of their estimated market value. The portion of mortgaged homes that were equity-rich in the third quarter of 2021 – one in three – was up from 34.4 percent in the second quarter of 2021 and from 28.3 percent in the third quarter of 2020. The report also shows that just 3.4 percent of mortgaged homes, or one in 29, were considered seriously underwater in the third quarter of 2021, with a combined estimated balance of loans secured by the property of at least 25 percent more than the property’s estimated market value. That was down from 4.1 percent of all U.S. homes with a mortgage in the prior quarter and 6 percent, or one 17 properties, a year ago. The improvements at both ends of the equity scale represented some of the largest quarterly gains in two years and provided yet another sign of how strong the U.S. housing market remained in the third quarter. “Homeowners across most of the United States could sit back with a smile yet again in the third quarter and watch their balance sheets grow as soaring home prices pushed their equity levels ever higher. Amid the best gains in two years, nearly four of every 10 owners found themselves in equity-rich territory,” said Todd Teta, chief product officer with ATTOM.
Mortgage Rates Drop Below 3% Yet Again. Mortgage rates fell below 3% in the week ending November 10, according to the latest Freddie Mac PMMS mortgage report. The 30-year fixed-rate mortgage declined to 2.98% last week, falling 11 basis points from 3.09% the week prior. A year ago at this time, the average 30-year fixed-rate loan averaged 2.84%. Although rates remain close to historic lows, market observers do expect rates to climb upward, eventually. The MBA projects that by the end of 2022, mortgage rates will approach 4%. Mortgage rates have remained low in large part due to the Federal Reserve’s massive monthly purchases of $120 billion in U.S. Treasury bonds and mortgage-backed securities. The Fed has said that it’s satisfied that substantial economic progress has been made in the labor market and will begin tapering its asset purchases later in November.
Housing Affordability Holds Steady But Supply-Side Challenges Persist. Housing affordability held steady at its lowest level in nearly a decade, as higher home prices offset lower mortgage rates to keep the affordability rate flat in the third quarter of 2021. In the months ahead, however, supply-chain disruptions and the prospect of higher interest rates will continue to threaten housing affordability. According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI), 56.6 percent of new and existing homes sold between the beginning of July and end of September were affordable to families earning the U.S. median income of $79,900. This is unchanged from the 56.6% of homes sold in the second quarter of 2021 and remains the lowest affordability level since the beginning of the revised series in the first quarter of 2012.
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