Housing cooling period brings equity buffer to homeowners in west and south

The share of mortgage debtors with significant equity fell in the second quarter, with homeowners in the West and South being hardest hit in 2023, according to a new study.

According to US Home, equity-rich mortgages – those with a loan-to-value ratio of 50% or less, where the borrower’s equity is at least half of the property’s value – fell to 46.1% from 47.4% in the previous quarter. underwater Report Published by real estate data company ATOM.

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The measure is down nearly 2 percentage points from the end of 2022 but remains at historically high levels after homeowners benefited from the pandemic housing boom. The largest declines last year were seen in the South and West, while the Northeast experienced the largest increases.

ATOM CEO Rob Barber said: “The long-term boom in the U.S. housing market may be showing signs of slowing.” However, “there do not appear to be major warning signs.”

ATOM said last year’s median increase was one of the weakest since 2012, when the U.S. housing market was just beginning to recover from the Great Recession, after a long period of price surges that boosted homeowner wealth. The supply of homes for sale is tight, employment is strong, and the investment market is rising.

The state with the highest equity levels in equity-rich mortgage properties last quarter was Vermont at 83%, followed by Maine and California. On a more granular level, some wealthy ZIP codes, such as Naples, Florida, or Martha’s Vineyard, Massachusetts, have rates above 85%.

The proportion of homes considered severely insolvent (i.e. with loans at least 25% above estimated market value) has been rising but remains low, accounting for just 2.6% of all residential mortgages.

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