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Almost 45% of homeowners are now equity rich Latest trend on home equity is good news for homeowners, challenging for first time buyers

Didier Malagies • May 16, 2022


Soaring home prices continue to serve existing homeowners, with nearly 45% of all property owners now considered equity rich, a year-over-year jump that boosted 13% more homeowners into the prime position.

A homeowner is considered equity rich when they have at least 50% equity in their home, a feat more easily accomplished when skyrocketing home price appreciation widens the gap between what someone owes on their mortgage and the value of their house.


About 44.9% of mortgaged residential properties in the first quarter of 2022 had at least 50% equity in their property, according to ATTOM. The portion of mortgaged homes that were equity rich rose from 41.9% in the fourth quarter of 2021 and from 31.9% during the same period in 2021. 


“Homeowners continue to benefit from rising home prices,” Rick Sharga, executive vice president of market intelligence for ATTOM, said in a statement. “Record levels of home equity provide financial security for millions of families, and minimize the chance of another housing market crash like the one we saw in 2008. But these higher home prices and rising interest rates make it extremely challenging for first time buyers to enter the market.”


In the first quarter of 2022, just 3.2% of mortgaged homes, or one in 31, were considered seriously underwater – meaning the owner owed at least 25% more than the property’s estimated market value. While that figure is largely unchanged from the 3.1% of seriously underwater homes in the prior quarter, it was a marked improvement from 2021’s 4.7%, or one in 21 properties. 


The decade-long housing marketing boom, which continued from late 2021 into early 2022, largely has been attributed to the rise in home equity. But across the country, the median home price rose 2% during that period – to another record of $320,500, according to ATTOM. Market analysts say a glut of home buyers chasing a historically tight supply of properties also brought up prices even higher.


ATTOM expects the latest home equity trend to slow in the remaining months of this year. 

“It’s likely that equity will continue to grow through the rest of 2022, although home price increases should moderate as the year goes on,” Sharga said. “Rising interest rates, the highest inflation in 40 years, and the ongoing supply chain disruptions due to the war in Ukraine are likely to weaken demand and slow down home price appreciation.”


Nationwide, 45 states saw equity rich levels rise from the fourth quarter of 2021. However, at the same time, the percentage of mortgaged homes that were seriously underwater increased in 28 states. 



Idaho had the highest level of equity-rich properties with 68.8%, while Vermont (68%), Utah (63.6%) and Washington (60.9%) followed. Meanwhile, Mississippi ranked first for having the country’s biggest portion of mortgages seriously underwater at 17%. It was trailed by Louisiana (11.3%) and Wyoming (10%).



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By Didier Malagies 25 Mar, 2024
Home equity levels among homeowners aged 62 and older are at record levels following the end of the pandemic. As a result, reverse mortgages may no longer be considered a “loan of last resort” as financial planners aim to highlight their uses as part of a comprehensive financial plan in retirement. This is according to a column published this week by Investment News, soliciting input from planner professionals well known to the reverse mortgage business, including Wade Pfau. But other data suggests convincing borrowers of the benefits remains very challenging. Reverse mortgage use as part of a broader financial plan “is really the intention in the financial planning space,” Pfau told the outlet. While reverse mortgage customers benefit greatly from low rates, the current high-rate environment doesn’t fully cancel out their potential use as a planning tool, he explained. “It’s all about the sequence-of-returns risk in retirement planning […] Spending from the home equity helps you preserve more investments, so there is going to be a bigger legacy at the end,” Pfau told the outlet. “The beneficiaries can get more. They can pay off the loan and still have a net windfall.” This perspective is consistent with prior statements Pfau has provided to other outlets, including to RMD . Other financial planners adjacent to the reverse mortgage space offered their own thoughts, including Steve Resch, vice president of retirement strategies at Finance of America Reverse (FAR). “The goal is for the client or the family to always retain an equity position in that property. […] Years ago, that wasn’t the case,” Resch said in the story, describing the housing crisis of 2008 as a “reckoning” for the reverse mortgage industry as well as the larger housing ecosystem. Resch explained that the ballooning length of retirement in America contributes to the potential utility of a reverse mortgage for qualifying borrowers. “It’s simply a matter of demographics,” he told Investment News. “We have an enormous population that is moving into retirement. We’ve got a massive amount of equity available. We’re looking at 20- to 30-year retirements. Bringing home equity into that plan really makes sense.” Another financial planner, Gateway Wealth Management founder David Foster, cited Pfau’s work in particular as helping to bring him around on the product category as a planning tool for clients, but convincing them to take a closer look at a reverse mortgage remains a major challenge. “I think reverse mortgages might be the single most underutilized retirement planning tool,” he told the outlet. “I have found it extremely difficult to have a rational conversation with my clients about reverse mortgages. Most people who’ve paid off their house just cannot fathom the idea of going back into debt. “No amount of logic will be able to convince them that it is wise to borrow against their house in retirement after having worked so hard to pay off their home prior to retirement,” Foster added. “I’ve even had people get borderline angry with me for even suggesting the idea.” Last year, Mutual of Omaha Mortgage released survey data suggesting that education hurdles remain very steep for the reverse mortgage industry when aiming to connect with a variety of different borrowers on multiple potential use cases. 
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