Southern States Sink As Seriously Underwater Home Mortgages Rise

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According to a report released on May 9, 2024, the number of properties classified as seriously underwater is ticking up, with southern states bearing the brunt of the phenomenon.

One in 37 homes with mortgages was considered seriously underwater during the first quarter, according to real estate data provider ATTOM's 2024 U.S. Home Equity & Underwater Report. That's up from one in 38 homes during the fourth quarter of last year.

A mortgage is considered seriously underwater when the estimated loan balance secured by a property is at least 25% more than the property's estimated market value.

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While homeowner balance sheets continue to benefit from equity gained during the housing boom, the windfalls are starting to erode as the market cools, ATTOM CEO Rob Barber said.

"It's too early to make any broad statements about the market direction, especially coming off the typically slower fall and winter months," Barber said. "But amid the recent trends, this year's spring buying season will be of heightened importance in telling us if there is a new long-term market pattern developing."

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The drop in equity comes as the national median single-family home and condo value declined 4% over the winter and was up just 3% year over year during the first quarter.

The biggest quarterly declines in equity were in the South, led by Kentucky, with the state's mortgage of mortgages considered equity-rich declining from 35.4% in the fourth quarter of 2023 to 28.7% in the first quarter of this year. South Carolina was down from 42.4% to 40%; Georgia from 46% to 43.7%; Delaware from 39.4% to 37.2%; and Indiana from 43% to 40.9%.

Home equity rose in 23 states, with the biggest improvements concentrated in the Midwest and West regions. South Dakota saw the biggest increase, up from 49.8% to 51.5%, followed by Hawaii from 55% to 56.5%; Montana from 57.3% to 58.7%; North Dakota from 30.4% to 31.5%; and Mississippi from 37.3% to 38.3%.

Metro areas with the lowest percentage of equity-rich properties include Baton, Rouge, Louisiana, at 12.7% with a median home price of $212,533; Little Rock, Arkansas, at 24% with a $197,000 median home price; Virginia Beach, Virginia, at 26.2% and a $305,000 median home price; and Tulsa, Oklahoma, at 27.6% and a $215,000 median home price.

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