(Bloomberg) — Approximately one in 37 homes in the US are currently classified as seriously underwater, with a higher concentration in southern states, according to data released on Thursday.
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At a national level, 2.7% of homes have loan balances that are at least 25% higher than their market value in the first few months of the year. This is an increase from 2.6% in the previous quarter, as reported in the first-quarter 2024 US Home Equity & Underwater Report from ATTOM, a real estate data firm.
Although the proportion of seriously underwater homes is rising, it is still significantly lower than pre-pandemic levels, when it was more than double the current rate.
Generally, mortgages become seriously underwater when a home is overpaid for, or when it is purchased with a small downpayment that does not provide a sufficient buffer if the property depreciates in value.
During the pandemic, government stimulus and increasing property prices benefited homeowners, but the recent rise in interest rates aimed at curbing inflation may be starting to cool the housing market.
Several southern states experienced a larger increase in the share of seriously underwater homes compared to the rest of the country. Kentucky’s share rose to 8.3% in the first few months of the year from 6.3% in the previous quarter. West Virginia saw an increase from 4.4% to 5.4%, Oklahoma from 5.5% to 6.1%, and Arkansas from 5.2% to 5.7% during the same period.
The states with the largest increase in the number of seriously underwater homes are also located in the south. Kentucky saw a year-over-year increase of over 20,500 homes, nearly twice as many as second-place Mississippi and Oklahoma, which came in third.
Among metro areas with a population of at least 500,000, Baton Rouge, La. had the highest share of seriously underwater mortgages in the first quarter, at 13.4%. New Orleans followed with 7.3%, then Jackson, Miss., and Little Rock, Ark., with 6.5% and 6%, respectively. Syracuse, NY rounded out the top five with 5.6% of homes seriously underwater.
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