Navigating the Rise of Seriously Underwater Mortgages

Lisa Mailhot  |  June 14, 2024

Buyers

Navigating the Rise of Seriously Underwater Mortgages

 

As temperatures rise this summer, the term "underwater" takes on a critical meaning for homeowners far beyond the comfort of a cool dip in the pool. An underwater mortgage occurs when the principal amount owed on a mortgage is higher than the home's current market value. When this figure exceeds 25%, the mortgage is considered "seriously underwater."

The Current Landscape

Recent data from ATTOM highlights a slight increase in the percentage of homeowners nationwide facing seriously underwater mortgages, rising from 2.6% last year to 2.7% today. Regions most affected include various Southern cities like Baton Rouge and New Orleans, as well as locales in the Midwest such as Jackson, MS, and Little Rock, AR.

The Pandemic's Role and Beyond

The origins of these underwater mortgages can largely be traced back to the COVID-19 pandemic, which fueled home price spikes due to a severe inventory shortage and low interest rates. However, as the market stabilizes, prices are correcting, leading to increased instances of underwater mortgages. Additional economic factors, such as shifts away from fossil fuel production and other regional economic declines, have exacerbated the situation in states like Louisiana, Kentucky, Oklahoma, and Wyoming.

Market Effects and Homeowner Options

This uptick in underwater mortgages could herald broader challenges for the real estate market. High home prices, combined with soaring maintenance costs and taxes, strain homeowners. For those currently underwater, options include enduring the downturn, seeking loan modifications, or considering short sales, though each path has significant implications.

Bottomline

If you're in a region witnessing a rise in underwater mortgages, it's crucial to understand your position and options. While the market presents challenges, strategic planning can provide a pathway forward. If you're contemplating moving to Orange County and want to navigate these complex waters successfully, let's connect and explore your best moves in today's market.

 

 

Reference: Gerstein, J. (2024, June 12). ‘Seriously Underwater Mortgages’ Are Spreading in the South and Midwest—This Could Be Bad for the Rest of Us. 

RECENT BLOG POSTS

From Corona to San Clemente: Navigating the Southern California Real Estate Market in Q2 2025

Explore the Southern California real estate market in Q2 2025 with insights on inventory trends, price changes, and buyer behavior in cities like Corona, Costa Mesa, D… Read more

Mortgage Rates Drop, Boosting Homebuyers' Purchasing Power

As mortgage rates drop to their lowest level in months, homebuyers are gaining more purchasing power. Discover how this shift is benefiting house hunters and what it m… Read more

California Eases Building Rules to Tackle Housing Crisis

California is tackling its housing crisis by rolling back the California Environmental Quality Act (CEQA), long criticized for stalling new developments. This game-cha… Read more

Understanding Current Housing Market Trends

The housing market is experiencing some noticeable changes, from fewer new listings to a drop in buyer activity. In this blog, we dive into the latest market shifts, w… Read more

US Median Home Prices Hit Record High

The median sales price of a U.S. home has surged to a record high of $396,500, but with more homes on the market, buyers are in a stronger position to negotiate. Learn… Read more

Mortgage Applications Rise Slightly After Recent Decline

Mortgage applications have increased by 1.1% following a decline the previous week, signaling some shifts in the housing market. In this blog, we explore the latest mo… Read more

Longtime Homeowner? This Hidden Tax Could Cost You Thousands

Many longtime homeowners in Orange County are sitting on a hidden tax burden due to outdated capital gains rules that haven’t changed since 1997. Learn how this overlo… Read more

Home Prices Slow as Buyers Gain Power

May 2025 saw home prices at seasonal highs, but growth has nearly stalled as market dynamics shift. With more listings than buyers, slower sales, and increased negotia… Read more

What Home Sellers Must Know About Capital Gains Tax

Selling your home may come with a tax obligation if you earn a profit. Learn how capital gains taxes work, what exemptions may apply, and how to plan strategically to … Read more

We are excited to assist you in finding your perfect home

Let's find a time that suits you best to chat about your goals, show you how we work, and figure out how we can help you the most