"Seriously underwater" mortgages live in the South and Midwest
Add Axios as your preferred source to
see more of our stories on Google.
Open embedded content from datawrapper.dwcdn.netWhile most U.S. homeowners are sitting on a mountain of home equity after years of rising house prices, in some pockets of the country an increasing share of mortgage holders are underwater on their loans.
Why it matters: That means these folks owe more on the mortgage than their home is worth, which puts them in a horrendous financial situation if they need to sell their house.
State of play: The South and Midwest have the highest share of underwater mortgages, per Attom.
- That's because in these areas home values have fallen from their peak during the pandemic housing boom.
- And people who bought at the top are seeing their home value dip below what they paid (or borrowed) for the house.
Zoom in: Louisiana has highest share of underwater mortgages (11.3%), up about a percentage point from a year ago. Home values dropped 6% from their summer 2022 peak, per Redfin data.
- In Wyoming, No. 2 on the list, the share grew from 3.3% to 8.8%, and home values are down roughly 12% since June 2023.
Reality check: These shares are still relatively small. After the housing crisis of 2008 1 in 4 homes with mortgages were underwater.
- Unemployment was high in that recession and many people who couldn't pay back their loans by selling their house were forced into foreclosure or short sales.
- Right now unemployment in the U.S. is low — and the economy is strong.
What they're saying: Don't panic. "It could be a temporary increase and not necessarily a major concern," National Association of Realtors chief economist Lawrence Yun tells us.
Yes, but: If the labor market or economy takes a turn, underwater homeowners are more at risk.
- With today's high mortgage rates, the most financially secure people are buying in cash, Redfin chief economist Daryl Fairweather says.
- Recent buyers who took out a mortgage likely have less cash to fall back on.
What's next: "This year's spring buying season will be of heightened importance in telling us if there is a new long-term market pattern developing," according to Attom CEO Rob Barber.
