The proportion of American homeowners with "seriously underwater" mortgages—where the loan balance exceeds the property's value by at least 25%—has risen to 3.2% in the second quarter, up from 2.7% a year prior, according to an analysis by real estate data firm ATTOM.
This trend signifies a weakening in homeowner equity across the nation. The problem has worsened year-over-year in 33 states and Washington D.C. Minnesota saw the most dramatic increase, with its rate of seriously underwater mortgages climbing to 12.1% in the second quarter. This marks a more than fourfold increase from 3% in the first quarter and 2.6% a year ago.
Louisiana, though still among the hardest-hit states, saw its rate decrease to 10.3% from 11.8% in the previous quarter and 11.9% a year earlier. Iowa ranked third with 7.8%, an increase from 6% in the first quarter and 5.9% a year ago. Mississippi and Arkansas followed, with 6.4% and 6% respectively.
Concurrently, the percentage of mortgaged homes considered "equity rich"—where owners owe no more than 50% of their home's value—has fallen to 41.1% in the second quarter. This is down from 43.3% in the first quarter and 47.4% a year earlier, reaching the lowest point in nearly five years. ATTOM CEO Rob Barber noted that while these metrics remain stronger than pre-2020 levels, the recent downward trend is a development to monitor.
In contrast, New York and New Jersey have shown resilience. New York's rate of seriously underwater mortgages was 1.5% in the second quarter, down from 1.9% in the prior quarter and 2% a year ago. New Jersey's rate stood at 1.6%, a decrease from 1.8% in the previous quarter and 1.7% a year prior. Vermont recorded the lowest underwater rate in the nation at 0.9%.