5.2 million properties seriously underwater – study

by Candyd Mendoza13 May 2019

Over 5.2 million properties in the US were seriously underwater in the first quarter, according to ATTOM Data Solutions, a premium property data provider.

A property is defined as “seriously underwater” when the property owner owes at least 25% more than the estimated market value of the property.

ATTOM reported 5,223,524 US properties were seriously underwater, up from last year’s 17,000-plus properties. The number of underwater properties recorded in Q1 2019 represented 9.1% of all properties with a mortgage nationwide, up from 8.8% in the past quarter but down from 9.5% in Q1 2018.

"With home prices increasing at a slower pace in 2018 than in previous years, the potential for people to climb out from mortgages that are underwater, or advance into equity-rich territory, tends to be reduced," said Todd Teta, chief product officer at ATTOM Data Solutions. "However, only one in 11 mortgages are seriously underwater today, compared to nearly one in three during the depths of the recession.”

According to ATTOM, the states with the highest share of seriously underwater properties include Louisiana (20.7%), Mississippi (17.1), Arkansas (16.3%), West Virginia (16.2%), and Illinois (16.2%).

“Although, if the latest trend continues, it will raise another clear signal of a market slowdown, which will be good for buyers, but not so good for sellers,” Teta said. “But if the pattern of the past few years takes hold – with levels of underwater and equity rich mortgages turning around – it will mean the market remains strong for sellers, with fewer needing to get out from under financial distress."