02/17/2026
More Than 1 Million Homeowners Are Underwater on Their Mortgage. Between the start and end of 2025, there was a 60% jump in the number of homeowners in a negative equity position. About 1.1 million American homeowners were underwater on their mortgages at the end of last year as home prices stalled, signaling a deepening crisis within the housing market. That figure represents 2.1% of all mortgage borrowers in the U.S.
Though the share may seem small in the context of the overall market, it’s also the largest since early 2018 and is also up nearly 60% from 696,000 at the start of 2025, making it a significant jump. (A homeowner is considered to be underwater on their mortgage when they owe more to their lender than what their home is worth — a position also referred to as “negative equity.”)
People in this situation would have to take a financial hit if they sold their house. As such, the rising share of underwater homeowners could mean less for-sale inventory for buyers to choose from.
The increase in underwater homeowners comes as home sales continue to stagnate while the housing market remains unaffordable to most Americans. Home price increases are also slowing down as buyer demand remains weak. While slowing prices are a boon to buyers, they also have an adverse effect on current homeowners and their home values. In addition to the 1.1 million people already underwater, an additional 3.2 million borrowers (or 7.9% of the overall population), have less than 10% equity in their home, according to the data released by Intercontinental Exchange. “This is somewhat alarming, but not exactly surprising,” Joel Berner, a senior economist at Realtor.com, told MarketWatch. “Home values are falling in some areas and … down payments have been low in recent years among new buyers.” Plus, “recent homeowners have not started with high levels of equity in their homes, so even small drops in value can lead to this result,” Berner adds.
On the positive side, for those older homeowners (62 or older) with large equity (at least 60%), they can now take advantage of the HECM loans. These loans eliminate the mortgagge payment and allow for increased cash flow for the borrower. Regulated by HUD and insured by FHA, these loans have become more popular and are safe for the borrower.
