What’s it take to be in the home equity elite?

Kenneth Harney
Kenneth Harney

Americans readily gossip about home values — “Did you hear the crazy high price the house down the street sold for?” “Did you hear how little our neighbors were forced to take on their sale?”

But people are much more reticent when it comes to home equity, which is not surprising: Prices and assessed values are public information. Equity holdings are not public, and they take some effort to figure out. Equity is intimate financial information, like a bank account or retirement fund balances, and represents a major part of most owners’ net worth.

So it tends to be closely held.

All of which makes a new statistical report on the equity levels of owners of more than 150 million homes with mortgages intriguing. The report comes from ATTOM Data Solutions, a research and analytics firm that tracks equity movements on a quarterly basis using public property information and proprietary automated valuation systems. According to ATTOM researchers, 34 percent of all American homeowners have 100 percent equity in their properties — they’ve either paid off their entire mortgage debt or they never had a mortgage.

Equity is the difference between the current market value of your home and the debt you’ve got against it. If you own a $400,000 house and your mortgage debt is $150,000, you’ve got $250,000 in equity. During the five years following the housing bust in 2007, when the real estate recovery began taking hold, American homeowners lost billions of dollars in equity. But today many have recouped all or most of it, and the Federal Reserve estimates that homeowners now control an astounding $1.37 trillion in equity wealth.

The latest ATTOM report opens a window on equity — where and in what types of homes equity holdings are especially large and where they tilt negative, with property values well below what owners could expect to get from a sale.

Some quick highlights:

— Fourteen million American homeowners, roughly one of every four owners with a mortgage, are “equity rich”: Their debt is less than 50 percent of their current home value. Thanks to rapidly rising home prices, that number has been spiraling; 1.6 million owners became equity rich last year alone.

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— On the flip side of the ledger, 5.4 million owners (9.5 percent of the total) are in serious negative equity positions, owing at least 25 percent more on their mortgages than their homes could command in the marketplace. But rising home prices are bailing out large numbers of the equity deficient: their number is down by more than 1.2 million in the last 12 months.

— The geographical distribution of high and low equity homes is stark — and not necessarily where you might have guessed. At the top of the list of ZIP codes with the highest share of equity rich homes is a neighborhood in Pittsburgh, Pennsylvania (ZIP code 15201, Lawrenceville), where by most measures home prices are moderate. The median list price this year is $277,000 — not a whole lot of McMansions in sight. Yet three out of every four owners there are equity rich.

Close behind is ZIP code 11220, the Sunset Park area of Brooklyn, New York, where prices range from $428,000 for a two-bedroom apartment to more than $1 million. More than 74 percent of the owner residents here have mortgage debt that is less than half of what their properties are worth.

Then there’s San Antonio, Texas, where ZIP code 78207 has a current median list price around $100,000, but you can get a five-bedroom detached house for $159,900. More than 71 percent of the owners in this relatively modestly priced neighborhood are equity rich.

So although regions with high priced homes — think San Jose, California, and the Washington D.C. metro area — statistically are more likely to be flush with equity, more moderately priced neighborhoods and cities can have impressive numbers among the equity rich. In fact, according to ATTOM, substantial percentages of homes valued from under $100,000 to $300,000 qualify for the same, elite category.

— Not surprisingly, longevity of ownership of a house is statistically correlated with higher equity holdings. ATTOM found that houses owned for more than 20 years are five times more likely to be equity rich compared with homes owned for less than a year.

Bottom line: Want to build big equity if you’re not an all-cash buyer? Stay put. Don’t pile on debt. And pay the mortgage.