The State With the Most Homes Worth Less Than Their Mortgages

Home prices have surged over the past year. The carefully follow S&P Case-Shiller home price index shows that, in May, home prices were more than 16% higher than in the same month last year. In Phoenix, the increase topped 20%. Some of the rise is due to people leaving expensive coastal cities like Los Angeles, New York and San Francisco. One example is the home price increase in Idaho driven by west coast residents. There are two other factors. One is historically low interest rates. Another is that people can work from home, which makes relocation more realistic.

One only has to go back to 2007 and 2008, when housing markets collapsed during the financial crisis and the Great Recession. The value of millions of homes dropped below the amount of their mortgages. These homes were termed “underwater.” The problem contributed to hundreds of thousands of delinquent mortgages. In turn, many of these went into foreclosure.

The number of underwater mortgages has dwindled across most of the United States as prices have risen. The great majority of homes now are what is known as “equity rich.” Real estate research firm ATTOM has just released its second-quarter “2021 U.S. Home Equity & Underwater Report.” Its primary conclusion is:

… that 34.4 percent of mortgaged residential properties in the United States were considered equity-rich in the second quarter, meaning that the combined estimated amount of loans secured by those properties was no more than 50 percent of their estimated market value.

On the other side of the coin, only 4.1% of mortgaged homes were underwater.

Three states had equity-rich homes that were more than 50% of the mortgaged properties located in them. These were Idaho (54.2%), California (53.8%) and Vermont (53.3%).

At the far end of the spectrum, the states with the lowest number of equity-rich homes were Louisiana (17.1%), Illinois (18.4%), Oklahoma (16.9%) and West Virginia (19.8%).

ATTOM also looked at the 106 metros with a population of over 500,000. The most equity-rich of these were San Jose (69.4%), San Francisco (64.9%), Los Angeles (57.9%) and Boise (57.4%).

The cities with the fewest equity-rich homes were Baton Rouge (13.5%), Columbia in South Carolina (16.2%) and Little Rock (17.5%).

Click here to see which county has the most expensive homes in America.