Many Tri-Cities homeowners sitting pretty on growing equity reserve

Tri-Cities homeowners are sitting pretty on a growing reserve of personal wealth.

During the past quarter, the number of local homeowners with mortgages who are equity rich increased 27.2% from Q4 last year, according to the ATTOM Data Solutions’ Home Equity & Underwater report.  And CoreLogic’s equity report says last year’s equity gains average $17,000 per homeowner.

Add to those examples to the Northeast Tennessee Association of Realtors (NETAR) annual Home Sales Report’s showing the average home resales price was $23,257 higher than it was in 2019, and you can see why the market is being described as “red hot.”

But what about those who asked for and got a grace period from the monthly mortgage? Or those lost their job and have fallen behind? So far, there are no county-level reports on the number of forbearances. And the number of red-flag mortgages and potential foreclosure filings have increased. But at the same time, during Q4 the number of local mortgaged properties that were seriously underwater declined from last year. And ATTOM’s January foreclosure report shows new filings at a historic low. Much of that can be attributed to the foreclosure industry being on a mandated pause.

“The good news is fewer and fewer homeowners are underwater on their loans,” said Rick Sharga, executive vice president of RealtyTrac, an ATTOM company. “But for those who are, the uncertainty of the economy during the pandemic looms large. The dual-trigger effect of losing a job and being underwater on a mortgage often, unfortunately, leads to foreclosure.” Obviously, there are matters that will have to be cleared out when the economy has an all-clear from the pandemic. But it’s not projected to be anywhere near the housing fall-out from the Great Recession. That’s a big part of the darker side of the local economy. The Tri-Cities labor market ended 2020 with almost 9,000 fewer jobs than it had at the end of 2019, and the monthly Bureau of Labor Statistics (BLS) reports show the job creation growth rate was out of steam and in negative territory.

The biggest declines of underwater properties were across the South, according to ATTOM’s report. The states with the largest increases were Connecticut, Nebraska, North Dakota, and Massachusetts.

ATTOM’s Home Equity Report shows 17.8 million residential properties in the U.S. were equity rich during the last three months of 2020. Equity rich is defined as the combined estimated of loans security by those properties was 50% or less of their estimated market value.

Locally there were a little more than 26,000 local mortgaged properties with equity rich status. The highest market share of those properties was Johnson Co. (30.4%). The lowest was Unicoi with 22.4%. A drill-down by ZIP code shows the 37617 area of Blountville had the highest regional share (31%). Blountville also the highest 2020 sales growth rate among local submarkets, according to NETAR’s State of the Market report.

Six of the 10 states with the biggest market share of equity-rich homes were in the West. States, where the share of equity-rich homes declined or went up by the smallest amount, were Nebraska, South Dakota, North Dakota, Massachusetts, and Iowa.

Local counties included in the report include Carter, Greene, Hawkins, Johnson, Sullivan, Unicoi, and Washington counties Tenn. and Va. All posted a higher share of equity-rich homes. Four – Carter, Greene, Sullivan and Washington Co. Va. – had declines in underwater properties.

“When it came to homeowner equity in the United States, the fourth quarter was more of the same as the third, which was more of the same as the second: a scenario that has continued to improve. The housing market kept booming despite the damage caused by the virus pandemic to the broader economy – a surge that continued to boost the equity that most property owners have in their homes,” according to Todd Teta, chief product officer with ATTOM. “As with many other housing-market metrics, the prospects for equity building even further in 2021 are wholly uncertain because of many questions surrounding the pandemic and the U.S. economy.”

That assessment accurately capsules the current local market dynamics.

The Tri-Cities housing market was the leading component of the local economy in 2020. One of the biggest speculations about 2021 is can the market sustain last year’s sales and price growth rates while bucking the headwinds of a stagnant labor market recovery and downward pressure on wages.

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