Homeowner equity continued to increase in the first quarter of 2021 as home values continued their upward growth, according to data released Thursday.

In the United States, 44.9 percent of homes were considered equity rich, up from 41.9 percent in the fourth quarter of 2021 and just 31.9 percent in the first quarter of 2021, according to a report from real estate data curator Attom Data Solutions.

The rising value of homes is one factor offsetting the chance of another housing market crash, according to  Rick Sharga, executive vice president of market intelligence at Attom. For first-time buyers, however, the rising values are creating unprecedented barriers to entry for homeownership. 

“Homeowners continue to benefit from rising home prices,” Sharga said in a statement. “Record levels of home equity provide financial security for millions of families and minimize the chance of another housing market crash like the one we saw in 2008. But these higher home prices and rising interest rates make it extremely challenging for first-time buyers to enter the market.”

According to the report, just 3.2 percent of mortgaged American homes were considered seriously underwater during the first quarter of 2022, flat from the previous quarter but a decrease from the 4.7 percent seen during the first quarter of 2021.

A total of 45 states saw equity-rich levels increase, while the share of seriously underwater homes increased in only 28 states during the first quarter, according to Attom.

The biggest improvements in homeowner equity came in the western and southern regions of the nation. The top 15 states where homeowner equity improved the most between the fourth and first quarters were all western or southern states, with the biggest improvement seen in New Mexico, where the share of equity-rich homes rose from 35.3 percent to 43.4 percent. New Mexico was followed by Florida (46.6 percent to 53.6 percent) and Montana (40.5 percent to 45.7 percent).

Large increases in the share of homes currently underwater were also seen in the South, as well as the Midwest, with Mississippi seeing a jump of homes underwater from 12.2 percent to 17 percent between the fourth and first quarters, followed by Missouri (5.1 percent to 6.6 percent) and Louisiana (10 percent to 11.3 percent).

Homeowners in underwater situations are likely to continue to benefit as equity increases, as the value of their homes offsets the amount they owe on their mortgage.

While experts predict home values will continue to increase throughout 2022, they predict that the rate of growth will soon slow down.

“It’s likely that equity will continue to grow through the rest of 2022, although home price increases should moderate as the year goes on,” said Sharga. “Rising interest rates, the highest inflation in 40 years, and the ongoing supply chain disruptions due to the war in Ukraine are likely to weaken demand and slow down home price appreciation.”