Mapped: Where Homeowners Are Seriously Underwater on Their Mortgages
Realtor.com · Julie Gerstein · 25 August 2026
TL;DR
A new ATTOM report shows 3.2% of US mortgages were seriously underwater in Q2 2026 — up from 2.7% a year earlier — representing between one and two million homes. A mortgage is considered seriously underwater when the outstanding debt exceeds the property's market value by 25% or more, trapping owners who cannot sell or refinance without a loss. Minnesota leads with 12.1% of homes in this position, followed by Louisiana (10.3%), Iowa (7.8%), Mississippi (6.4%), and Arkansas (6%). Analysts point to a surge in low-deposit FHA loans taken out near the 2022 price peak, combined with flat or declining home values in Midwestern markets, as the primary driver. Coastal markets, by contrast, saw rapid subsequent appreciation that absorbed the thin initial equity.
Our take
This is a US-market story, but it carries a clear lesson for South African property owners and buyers. The underwater-mortgage dynamic — buying near a price peak with a small deposit, then watching values stagnate — is not uniquely American. South Africa's own interest-rate cycle saw the prime lending rate climb sharply from 2022, squeezing buyers who stretched affordability with minimal deposits. In slower metros like Gqeberha, parts of the East Rand, or secondary Free State towns, buyers who purchased at 2021–2022 asking prices with 5–10% deposits may already be sitting on thin or negative equity if they needed to sell today. The practical takeaway for SA buyers: a larger deposit is not just about lower monthly repayments — it is your equity cushion against market softening. For landlords and buy-to-let investors, flat rental yields in oversupplied nodes compound the risk. Estate agents should be having honest conversations with clients about current valuations before listing, especially where bond balances are close to market value. Staying put and paying down the loan remains the soundest advice when equity is tight.
Read the full article
This is Liivra's summary + take. The full story lives at Realtor.com.
Read on Realtor.com