WASHINGTON, DC — The share of seriously underwater mortgages rose in the second quarter of this year, according to a new report from ATTOM, the real estate analytics firm. ATTOM said 3.2% of mortgages were underwater, up from 2.7% a year earlier. The firm defines an underwater mortgage as one where the homeowner owes at least 25% more than the home is worth.
That gap can matter because it creates negative equity, which can make selling or refinancing difficult without bringing money to the closing table. ATTOM said the 3.2% share still translates to roughly 1 million to 2 million homes nationwide, a level that can also limit the number of properties available for sale.
Where The Pressure Is Highest
The biggest year-over-year increases were in Minnesota, South Dakota, Iowa, Michigan and the District of Columbia. Minnesota had the highest share of seriously underwater mortgages in the latest quarter at 12.1%, up from 2.6% a year earlier. South Dakota rose to 5.7% from 3.1%, Iowa climbed to 7.8% from 5.9%, Michigan increased to 4% from 2.5%, and the District of Columbia moved to 5% from 3.7%.
ATTOM also listed the places with the largest declines. Louisiana fell to 10.3% from 11.9%, Kentucky dropped to 5.7% from 7%, North Dakota eased to 4% from 5%, Oklahoma slipped to 4.7% from 5.6%, and New York decreased to 1.5% from 2%. The highest overall shares this quarter were Minnesota, Louisiana, Iowa, Mississippi and Arkansas.
Why These Markets Stand Out
Mortgage researcher Mujahid Merchant said underwater loans have often been concentrated in Gulf and coastal states, but this cycle has shifted more toward places with many low-equity loans made in 2022 or later. He said rising interest rates after the early pandemic era pushed more buyers toward FHA loans, which can require as little as 3.5% down…