The days of rapid price increases seem to be over
Homeowner equity remained strong in the third quarter, reflecting years of consistent growth in residential property values. However, equity levels held steady this quarter, showing a pause in the sharp price increases seen earlier in the housing boom.
ATTOM's new report revealed that 48.3% of mortgaged residential properties were considered equity-rich, meaning homeowners owed no more than half of their property’s estimated market value.
While this figure was slightly lower than the 49.2% recorded in the second quarter of 2024, it remained historically high, up from 47.4% a year ago. ATTOM chief executive Rob Barber noted that the current trend follows typical market patterns.
"Homeowner equity typically mirrors home-price trends, and the third quarter of this year followed that pattern," Barber said in the report. "Equity remained elevated as the value of residential properties has surged consistently over the years. However, it held steady this quarter, reflecting the cooling of earlier sharp price increases."
The equity-rich portion of mortgaged properties remains well above the pre-pandemic levels of early 2020, when only 26.5% of homes were considered equity-rich. While equity-rich levels decreased in 28 states between the second and third quarters of 2024, annual increases were noted in 37 states, particularly in lower- and mid-priced markets in the Midwest and Northeast.
Leading the pack in equity growth were Vermont, where 86.4% of mortgaged homes were equity-rich by the third quarter of 2024 (up from 79.8% in 2023), West Virginia (up from 30.5% to 37%), and Connecticut (up from 41.5% to 47.7%). Other notable increases were seen in New Jersey and Rhode Island, with equity-rich rates rising to 52% and 60.6%, respectively.
On the flip side, equity-rich levels dipped in some of the western states, where home prices have been cooling off. Utah saw its equity-rich share decline from 56.8% to 52.4% year-over-year, while Arizona, Colorado, Washington, and Oregon also posted drops.
At the other end of the spectrum, seriously underwater mortgages—where homeowners owe at least 25% more than their property’s estimated value—remained low. In the third quarter, 2.5% of mortgaged homes were considered seriously underwater, a slight increase from 2.4% in the previous quarter, but unchanged from a year earlier. This number represents a significant improvement compared to 2020, when one in 15 homes fell into this category.
While the rate of seriously underwater mortgages worsened in 30 states from the second quarter to the third, it improved annually in 24 states, signaling a generally stable environment for homeowners.
Read next: One street over, worlds apart: The hyper-local dynamics shaping real estate pricing
Despite the recent stabilization, home equity continues to play a significant role in the economy, providing financial leverage for millions of homeowners.
"Home equity keeps providing a significant boost to the economy in the form of financial leverage that tens of millions of households can use to finance major purchases or investments," Barber added.
Looking forward, he forecast that slight movements in equity levels, either up or down, could be expected as the housing market moves into its slower season.
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