Equity-Rich Homeowner Share Hits Five-Year Low as Underwater Mortgages Climb

The share of American homeowners sitting on substantial home equity fell to its lowest point in five years during the second quarter of 2026, while the portion of properties with seriously underwater mortgages ticked upward, according to new data from real estate analytics firm ATTOM. Realtor.com News published the findings on August 20, 2026.

Just 41.1% of mortgaged residential properties were considered equity-rich in Q2 2026 — meaning the homeowner holds at least 50% of the home's value — down from 43.3% in the first quarter and a steep drop from 47.4% at the same point in 2025. That six-plus-percentage-point annual decline lands the figure at its weakest reading since before the pandemic housing surge reshaped household balance sheets.

At the same time, 3.2% of properties were classified as seriously underwater — defined as owing at least 25% more than the home's current market value — matching the prior quarter's rate but up from 2.7% a year earlier. Thirty-three states and Washington, D.C. recorded year-over-year increases in the seriously underwater share.

Who Is Actually Going Underwater — and Why

The homeowners most at risk aren't the ones who bought before or at the start of the pandemic and locked in rates in the 2%–3% range. Those buyers generally built equity quickly as prices surged and carry payments low enough to sit tight. The vulnerable group is more specific: buyers who purchased between 2022 and 2024 near peak prices, often with down payments of 3%–5%, using FHA or VA loan programs.

When you put that little down at the top of a market and prices flatten or pull back even modestly, transaction costs alone — agent commissions, repairs, closing fees — can wipe out whatever thin equity you had. Several experts cited by Realtor.com News made this point clearly: a small correction is all it takes when the starting equity cushion is minimal.

There's a second dynamic worth noting, particularly in states like Florida. Some homeowners still have equity on paper but are being squeezed underwater on carrying costs by rapidly rising property taxes and insurance premiums. For those sellers, a low locked-in mortgage rate offers no relief — they can't transfer it to a buyer, and they can't hold on indefinitely while costs compound.

The geographic picture is uneven. Minnesota stands out sharply: the share of seriously underwater properties there jumped from 2.6% a year ago to 12.1% in Q2 2026, with Minneapolis recording 13.4% of homes seriously underwater — the highest rate among major metro areas tracked. Iowa, Michigan, South Dakota, and Washington, D.C. also saw significant annual increases. On the other side of the ledger, Louisiana, Kentucky, Oklahoma, North Dakota, and New York all saw their underwater shares decline year over year.

What the Numbers Mean If You Have Equity and Plan to Sell

If you bought before 2022 or put 20% or more down, you're almost certainly still in positive territory — and the data supports that. ATTOM CEO Rob Barber noted that overall equity levels remain healthier than pre-2020 norms. The concern is directional: the trend has moved in the wrong direction for four or more consecutive quarters, and that matters to sellers for reasons beyond their own balance sheet.

A rising share of underwater homeowners in your local market suppresses comparable sales activity. Neighbors who can't afford to sell without taking a loss simply don't list. That tightens supply but also limits the pool of recent sales data that appraisers and buyers use to validate pricing. In markets where underwater ownership is concentrated — Minneapolis being the starkest current example — this can create friction even for sellers who are well above water.

Buyers in these markets are also more cautious. When distressed or forced sales start appearing in the comps, even motivated buyers push back on price. That doesn't make your property unsellable, but it means your pricing strategy needs to be tight from day one rather than starting high and adjusting down.

Sellers in Strong-Equity States Have a Narrowing Window

Four states bucked the national trend and saw year-over-year gains in equity-rich properties: North Dakota, South Dakota, Kentucky, and Wyoming. Sellers in those markets are operating from a position of strength that their counterparts in Minnesota or Michigan simply don't have right now.

But even in strong-equity states, the broader trend is a signal. The pace at which the national equity-rich share has declined — more than six percentage points in a single year — is not a gradual normalization. It reflects a market where price appreciation has stalled or reversed in many areas, and where a meaningful portion of recent buyers have almost no buffer left.

For sellers who are equity-rich, that creates both an opportunity and a time consideration. Buyers who got stretched thin in 2022–2024 are still in the market, often renting or holding, waiting for conditions to shift. A seller with genuine equity to negotiate with is in a different conversation than one who needs a specific number to break even. Knowing your actual equity position — not a rough estimate, but a real figure — is the foundation of any credible pricing decision right now.

If you want a fast read on where you stand, Local Home Buyers USA's instant-offer tool can give you a concrete number to work from before you commit to anything.