Nearly half of Sacramento homeowners are now ‘equity rich.’ Here’s what that means
Nearly half of Sacramento-area homeowners are now considered “equity rich,” thanks in good part to dramatic home price escalation before and during the COVID-19 pandemic.
A national study released Thursday found that 47% of homeowners with mortgages in the four-county capital region currently own homes that are now worth more than twice their mortgage balance, according to ATTOM Data Solutions, a national real estate analyst. (Another estimated 20% of California homeowners are mortgage-free.)
That 47% figure is up notably from last year, when 35% would have been able to sell their home and pocket at last half of their home’s value.
Notably, Sacramento homeowners are sitting on bigger equity than homeowners on average around the country, 34% of whom are considered equity rich, up from 27.5% the year before.
The capital region - Sacramento, Placer, El Dorado and Yolo counties - has the 13th highest percentage of equity-rich owners among the 108 largest metro areas in the country.
Leading the way in the region were some of the wealthier enclaves. Tahoe City, where 68% of owners were equity rich, followed by Truckee, Davis, South Lake Tahoe, the Pocket area of the city of Sacramento and the East Sacramento area.
Some older, more modest enclaves, such as parts of Oak Park, Elmhurst, Lemon Hill, Tahoe Park and Florin also scored high. That could be because more homes in those areas are owned by longtime families who have paid down their mortgages over the years, and because others may have been bought at bargain prices by investors during the foreclosure surge a decade ago.
But Sacramento homeowners’ equity wealth lags California as a whole. Nearly 54% of California homeowners are equity rich, led by owners in San Jose and San Francisco, the two most equity-rich metropolitan areas in the country.
That has created a phenomenon that allows some Bay Area homeowners to cash out and buy in the Sacramento region and elsewhere in Northern California, helping drive up prices here.
The Grass Valley and Nevada City area has seen an increase in Bay Area buyers of upper-end properties during the COVID-19 shutdowns over the past year, said Brian Melsheimer, an appraiser in Nevada County.
“We have more activity at the $700,000-plus higher end of the market than we have ever seen before,” Melsheimer said this spring. “Every time, it is a Bay Area buyer. They are capitalizing on their equity (by trading in) 1,500-square-feet in the Bay Area for 10 acres here.”
In Sacramento, home values jumped about 20% in the region in the last year, but have slowed in the last month, an indication that Sacramento has hit its typical summer calming period, but also possibly a hint that the booming price increases of the last year may be over.
The percentage of homeowners who are “underwater,” owing more on their mortgage than their house is worth, dropped over the past year to 5% nationally, 1.4% in California, and 1.5% in the Sacramento region, according to ATTOM.
ATTOM analysts say the combination of fewer houses on the market in the past year along with low mortgage rates have prompted competition for houses, driving values up for all houses.
“The huge home-price jumps over the past year that helped millions of sellers ... kicked in big-time ... for other owners who saw their typical equity improve more than at any time in the last two years,” said Todd Teta of ATTOM. “Instead of the virus pandemic harming homeowners, it’s helped create conditions that have boosted the balance sheets of households all across the country.”
But, he said, “there are still a lot of questions hanging over the near future of the U.S. housing market, with some connected to how well the economy keeps recovering from the pandemic.”
This story was originally published August 5, 2021 at 12:01 AM with the headline "Nearly half of Sacramento homeowners are now ‘equity rich.’ Here’s what that means."