Slower price growth helps homebuyers, hurts underwater mortgages

Register now

As home price appreciation levels off, the amount of underwater loans rose in the first quarter while equity-rich properties continued adding value, according to Attom Data Solutions.

Seriously underwater properties — those with loan-to-value ratios of 125% or above — increased year-over-year, rising to 5.22 million from 5.21 million. However, the share of all properties decreased to 9.1% from 9.5%. It also represented a quarter-over-quarter increase from 5 million homes and an 8.8% share.

"With home prices increasing at a slower pace in 2018, than in previous years, the potential for people to climb out from mortgages that are underwater or advance into equity-rich territory, tends to be reduced," Todd Teta, chief product officer with Attom Data Solutions, said in a press release. "However, only one in 11 mortgages are seriously underwater today, compared to nearly one in three during the depths of the recession."

Southeastern states had the three highest shares of seriously underwater properties, led by Louisiana at 20.7%, Mississippi at 17.1% and Arkansas at 16.3%.

Equity-rich homes — those with a loan-to-value ratio of 50% or lower — totaled 14.4 million and a 25.1% share in the opening quarter of 2019, up from the year prior's total of 13.84 million but a slight drop in its percentage of 25.3%. It fell from 14.57 million and 25.6% the previous quarter.

California's recurrently high-valued real estate again led all states with a 43% share of equity-rich properties, with Hawaii second at 38.1% and New York third at 34.2%.

"If the latest trend continues, it will raise another clear signal of a market slowdown, which will be good for buyers, but not so good for sellers. But if the pattern of the past few years takes hold — with levels of underwater and equity rich mortgages turning around — it will mean the market remains strong for sellers, with fewer needing to get out from under financial distress," said Teta.

For reprint and licensing requests for this article, click here.
Distressed Mortgage defaults Foreclosures Home prices Attom Data Solutions