A larger proportion of borrowers built their equity in the fourth quarter, while the proportion of underwater real estate shrank, according to Attom Data Solutions.
Of the nation's 59 million mortgaged properties, 17.8 million – or 30.2% – were classified as equity-rich, with a combined loan-to-value ratio of 50% or less. The steady improvement continued from 16.7 million and 28.3% in the third quarter, with the number of equity-rich homes increasing by over two million in two years.
"Right now, homeowners are pretty much sitting on a growing reserve of personal wealth," Todd Teta, Attom's chief product officer, said in the report. "As with many other real estate metrics, the prospects for further stock appreciation in 2021 are completely uncertain due to many issues related to the pandemic and the US economy."
Vermont was at the top of all states with a share of equity-rich homes at 47.8%. Stocks of 46.1% in California, 42.7% in Idaho, 41% in Washington, and 40.4% in Hawaii rounded out the top 5. Of the 107 metropolitan areas with more than 500,000 residents, California had the highest proportion of equity-rich real estate. San Jose took first place with a share of 65.7%. Followed by San Francisco with 57.5%, Los Angeles with 51.7%, Santa Rosa with 45.1% and San Diego with 44.5%.
At the opposite pole, 3.2 million U.S. homes – or 5.4% – underwater with LTV ratios over 125% were considered serious. The numbers were also on an improved trajectory: they declined from 3.5 million and 6% in the previous quarter and declined 1.8 million in two years.
Louisiana had the highest proportion of serious underwater properties in the country at 14.9%. Mississippi and West Virginia were 11.4%, while Iowas was 11.3% and Arkansas 10.7%. At the subway area level, Baton Rouge, La., Had the highest proportion of underwater homes at 14.2%. Syracuse, New York (14%), Youngstown, Ohio (12.5%), Toledo, Ohio (11.3%), and Scranton, Pennsylvania (11.2%) filled the bottom five places.
"The good news is that fewer homeowners across the country are having their loans underwater," said Rick Sharga, executive vice president of RealtyTrac, an ATTOM Data Solutions company. “But for the homeowners who are, economic uncertainty is great during the pandemic. Unfortunately, the dual trigger effect of losing a job and having a mortgage underwater often leads to foreclosure. "