The share of mortgaged U.S. homes considered seriously underwater climbed to 3.2% in the second quarter, with Minnesota posting the nation’s highest rate at 12.1%, according to ATTOM.

By yourNEWS Media Newsroom.

A growing share of American homeowners owed substantially more on their mortgages than their properties were worth during the second quarter, with 3.2% of mortgaged residential properties nationwide classified as “seriously underwater,” according to real estate analytics company ATTOM.

ATTOM said Sept. 11 that the national rate increased from 2.7% during the same period in 2025. A property is considered seriously underwater when the combined balance of loans secured by the home is at least 25% greater than its estimated market value.

The share increased year over year in 33 states and the District of Columbia, with Minnesota recording the highest percentage in the country, followed by Louisiana, Iowa, Mississippi and Arkansas.

Minnesota experienced the most pronounced increase. Seriously underwater properties accounted for 12.1% of mortgaged homes in the state during the second quarter, compared with 2.6% one year earlier.

Isanti, Mille Lacs, Todd and Meeker counties had the highest concentrations within Minnesota.

The rise comes as the state faces broader affordability pressures. Minnesota Housing Partnership’s 2026 State Profile reported that home values have been increasing faster than household incomes.

The advocacy organization also found that none of Minnesota’s five most in-demand occupations — registered nurses, cashiers, fast food and counter workers, retail salespersons, and personal care and home health aides — provides enough income for workers to afford homeownership.

The median age of a first-time homebuyer has meanwhile reached a “historic high” of 40, which Minnesota Housing Partnership said reflects mounting barriers to entering the housing market.

Louisiana ranked second nationally, although its seriously underwater rate improved from the previous year. About 10.3% of mortgaged properties there fell into the category during the second quarter, down from 11.9% a year earlier, according to ATTOM.

Jefferson Davis, De Soto, Webster and Avoyelles counties recorded the greatest concentrations in Louisiana.

Iowa followed with 7.8% of mortgaged properties seriously underwater, while Mississippi stood at 6.4% and Arkansas at 6%.

At the opposite end of the rankings, Vermont had the smallest share of seriously underwater properties. Rhode Island, Massachusetts, New Hampshire and New York also reported rates of 1.5% or less.

The deterioration in negative-equity figures coincided with a decline in another measure of homeowner financial strength.

ATTOM reported Aug. 20 that 41.1% of mortgaged residential properties nationwide were considered equity-rich during the second quarter. A home qualifies as equity-rich when the total balance of loans secured by the property is no more than half of its estimated market value.

“These two measures of home equity strength, the rates of equity-rich and seriously underwater homes, remain healthier than they were prior to 2020,” ATTOM CEO Rob Barber said.

“However, both have been moving in less favorable directions over the past year, suggesting a trend worth watching.”

Negative equity can create problems even for borrowers who remain current on their mortgage payments.

Rocket Mortgage reported April 25 that underwater homeowners may have difficulty selling because the proceeds from a sale can be insufficient to pay off the outstanding loan balance.

That can also complicate the purchase of another home. Many homeowners use proceeds from selling an existing property to fund the down payment on their next residence, but an underwater sale may leave little or no equity available for that purpose.

More serious consequences can arise if an underwater homeowner falls behind on mortgage payments. After payments remain delinquent for a sufficient period, the lender can pursue foreclosure in an effort to recover the outstanding debt.

Refinancing may still be available to some borrowers whose mortgages exceed the value of their homes.

A May 26 LendingTree post identified the Federal Housing Administration’s streamline refinance program as one option for borrowers with qualifying FHA loans. Unlike a traditional FHA refinance, the streamline program can involve reduced documentation and underwriting requirements.

Owners of qualifying rural properties may also have access to U.S. Department of Agriculture streamlined or streamlined-assist refinancing. LendingTree said both programs generally carry more relaxed documentation and underwriting requirements than a conventional USDA refinance.

The latest ATTOM figures show that most mortgaged homeowners remain outside the seriously underwater category and that equity conditions nationally remain stronger than they were before 2020.

The year-over-year movement, however, was unfavorable on both sides of the equity picture: the seriously underwater share rose to 3.2%, while ATTOM said measures of strong homeowner equity have also been moving in a weaker direction.

The sharp variation among states was particularly evident in Minnesota, where more than one in 10 mortgaged homes met ATTOM’s seriously underwater definition during the second quarter, compared with 1.5% or less in the five states with the lowest rates.

Original article