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Home Equity Lending Could Have Aided Equity Rich Decline

Residential borrowers who are considered to be equity rich accounted for a smaller share of all borrowers during the third quarter, and home-equity lending might have had something to do with it.

Equity-rich borrowers, those whose loan-to-value ratios are no higher than 50%, accounted for 47.4% of all mortgage borrowers, according to ATTOM’s third-quarter 2023 U.S. Home Equity & Underwater Report.

U.S. equity-rich share thinned from 49.2% during the preceding three-month period — marking the largest quarter-over-decline since at least 2019. The drop was more modest compared to the third-quarter of last year, when equity-rich homeowners represented 48.5% of all borrowers.

The significant narrowing came despite home values recently rebounding, Irvine, California-based ATTOM said in the report. Median home prices jumped 11% from the second quarter.

“We saw an unusual downturn at the equity-rich end of the spectrum,” ATTOM Chief Executive Officer Rob Barber stated in the press release. “That could have just been a temporary blip. It also could have reflected 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.”

Leading the national rate lower was South Carolina, where its equity-rich share was 43.7%, down from the second quarter by 6.3 percentage points — more than any other state. A 6.0 percentage-point drop left Florida’s share at 54.4%, and Kentucky share retreated 5 percentage points to 37.1%.

With a 3.5-percentage point rise, South Dakota had the best increase of any state and landed at 49.9%. Maine’s share fattened 3.3 percentage points to 59.3%, and a rise of 2.9 percentage points left Connecticut’s equity-rich share at 41.5%.

After all was said and done, Louisiana had the lowest equity-rich share: 19.7%. Illinois had a share of 29.8%, and Alaska’s 29.8% share was the third lowest.

Vermont’s 79.8% equity-rich share was the widest of any state.  New Hampshire’s 59.4% was a distant second, and Maine was No. 3 at 59.3%.