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Home equity declined in the first quarter for many Americans


The first quarter of 2023 saw a drop in the home equity of many Americans, new data shows.

Key findings

  • The proportion of mortgages considered equity-rich fell from 48% to 47.2% in the first quarter of 2023.
  • It was the second straight quarterly decline after 10 months of gains.
  • The share of wealthy homebuyers fell in the first quarter from the fourth in 32 states.

The share of mortgaged homes that are equity-rich, meaning the combined estimated loan balance is no more than 50% of estimated market value, fell from 48% to 47.2% in the first quarter.

It was the second straight quarterly decline for U.S. equity-rich homes, following 10 straight quarterly gains, according to Attom, a real estate data analytics firm.

The share of wealthy homebuyers fell in the first quarter from the fourth quarter in 32 states as price growth in the US housing market slowed or reversed.

“U.S. homeowners continue to be in a much better position than they were just a few years ago, with historically high levels of wealth accumulated in their properties,” said ATTOM CEO Rob Barber. “However, the recent downturn in the housing market is reducing the gains they have reaped from a decade of booming prices. Home equity fell modestly amid a larger decline in the profits homeowners receive when they sell.”

Barber said it’s still too early to tell if the trend is long-term. “There are reasons to hope for a turnaround in the market this year,” he said. “For now, however, various measures suggest that the best of the boom may be behind us.”

Homebuyers are discouraged by market conditions, including a lack of homes for sale. Many potential sellers feel attached to the low interest rate they received when they purchased their home, resulting in low inventory and limited options. Although average rates are in modest decline, concerns about the Federal Reserve’s response to inflation, bank volatility and housing prices are holding back the process for many.

The largest decline in home equity was in the West. Arizona led declines in the first quarter, where the share of mortgages considered equity-rich fell to 56.4% from 59.9% in the quarter. Nevada, Idaho, Utah and Washington followed.

The share of mortgages that became more equity-rich increased the most in the South. Mortgages in New Mexico, Kentucky, Mississippi and Oklahoma became more capital rich.

A tenth of recent home buyers have been found to have defaulted on their mortgages, meaning they owe more than their house is worth, according to data company Black Knight. The number has been rising since 2021 as potential homebuyers seek loans from the Federal Housing Authority and the Veterans Administration that require lower down payments to try to keep costs down.

Attom’s data found that 3% of homes were considered “severely underwater” in the first quarter, meaning the owner’s combined estimated loan balance was at least 25% more than the property’s estimated market value. The figure is down from 3.2% in Q1 2022.

Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.