The tumultuous events of 2020 may have put a damper on much of the U.S. economy. But real estate has remained unscathed. In fact, the residential real estate market has done remarkably well this year, with few signs of stopping. The high demand among homebuyers has been well reported on, but this week brings another compelling way of analyzing the strength of the market—equity.
The 3rd Quarter of 2020 was a very good period for home equity, according to research done by the DaaS (Data-as-a-Service) firm, ATTOM Data Solutions. Out of the 58.9 million US homes with mortgages, approximately 16.7 million were considered equity-rich. That is 28.3% of homes, up from 27.5% in the 2nd Quarter of 2020 and 26.7% in the 3rd Quarter of 2019.
ATTOM defines equity-rich as: “Loan to value ratio of 50 percent or lower, meaning the property owner had at least 50 percent equity.” The share of homes that meet this criteria went up this quarter in 49 of the 50 states. The five states with the greatest increase in equity-rich homes were Vermont, Maine, South Dakota, New Hampshire, and Idaho.
Most of the major metropolitan areas with the highest share of high equity homes are concentrated on the West Coast, in cities like Seattle, San Francisco, and Los Angeles. San Jose, California, tops this list with 63.7% of homes there being equity-rich. California still has the highest share of such homes, although it also experienced the sharpest decline in this quarter down to 39.1% from 43%
The number of homes seriously underwater is simultaneously decreasing. The share of homes underwater only increased in seven states. In only one of those seven did it increase by more than 1%. These states are largely in the South and Midwest, with the top five states for percentage of homes underwater being Louisiana, West Virginia, Mississippi, Iowa, and Arkansas.
All this data underlies the continuing strength of the residential real estate market going into the 4th Quarter of 2020. Homeowners across the country are seeing their investment pay off as the extremely high demand for homes drives up prices.