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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 74 December 2023 J O U R N A L SHARE OF MORTGAGED HOMES CONSIDERED EQUITY-RICH DECLINED IN Q3 A TTOM has released its Q3 2023 U.S. Home Equity & Underwa- ter Report, which shows that 47.4% of mortgaged residential properties in the United States were considered equity rich in Q3, meaning that the combined estimated amount of loan balances secured by those properties was no more than half of their estimated market values. The portion of mortgaged homes that were equity-rich in Q3 of 2023 decreased from 49.2% in Q2 2023—the largest quar- terly decline since at least 2019. The latest figure was also down from 48.5% in Q3 2022. Those declines happened despite home values rebounding recently from a fallback that had lasted from the middle of last year to the early part of this year. But while equity-rich levels dropped in the third quarter, the report also shows that the portion of mortgaged homes that were seriously underwater in the United States continued to improve. Just 2.5% of all residential mortgages (one in 40) were considered seriously underwater in Q3 2023. That meant they had a combined estimated balance of loans secured by the property of at least 25% more than the property's estimated market value. The seriously underwater level dropped from one in 36 homes in Q2 and one in 35 in Q3 2022, to the lowest point in at least four years. "By all measures, homeowner equity around the country remained strong during the third quarter as millions of households kept benefiting from the nation's extended runup in home values. At the same, though, we saw an unusual downturn at the equity-rich end of the spectrum," said Rob Barber, CEO of ATTOM. "That could have just been a temporary blip. It also could have reflect- ed an increase in long-time owners who had lots of equity built up selling their homes, or perhaps borrowing against their rising wealth and slipping out of equity-rich territory. The fourth quarter data should say more about whether residential equity in the U.S. has indeed topped out." The mixed equity patterns came as the U.S. housing market continued recovering from the downturn that had threatened to end the decade-long run of price and equity growth. The median nationwide single-fam- ily home price rose 11% over the second and third quarters of this year, following an 8% drop from mid-2022 to early 2023. Values went back up as the job market remained strong, with the national unemployment rate below 4% and con- sumer price inflation down to less than half the level of a year earlier. A strong investment market also puts more money in the hands of potential homebuyers. An ongoing tight supply of homes put additional upward pressure on prices, along with a temporary lull in a two-year rise in home mortgage rates. The potential for more uneven equity trends remains in place as mortgage rates rise toward 8% for a 30-year loan and the housing market heads into its annual slow season, which usually leads to smaller price increases or even small declines. Equity-Rich Share of Mortgages Drops in Almost 30 States The portion of mortgages that were equity-rich went down in 29 of the 50 U.S. states from Q2 2023 to Q3 2023, common- ly by one to four percentage points. The biggest declines came in the South region, led by: » South Carolina (the proportion of Market Trends