(Bloomberg) — About one in 37 homes in the United States is now considered seriously submerged, and that proportion is much higher in many southern states, according to data released Thursday.
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Nationally, 2.7% of homes had loan balances at least 25% higher than their market value during the first months of the year. This is up from 2.6% in the previous quarter, according to the Q1 2024 US Home Equity & Underwater report from ATTOM, a real estate data company.
Even though the share of these housing units is increasing, it remains well below what it was before the pandemic, when the rate was more than twice as high.
Mortgages can typically become seriously undervalued when a person overpays for a home or when it is purchased with a small down payment that does not provide sufficient protection if the property loses value.
During the pandemic, government stimulus and rising house prices have been a huge boon for homeowners, but higher interest rates intended to curb inflation could finally help calm the housing market.
Several southern states saw the share of severely underwater homes increase more than the rest of the country. Kentucky’s share jumped to 8.3% in the first months of the year, up from 6.3% in the previous quarter. West Virginia’s share increased from 4.4% to 5.4% during the same period, while Oklahoma climbed to 6.1% from 5.5% and Arkansas increased by 5 .7% versus 5.2%.
The states where the number of severely submerged homes has increased the most are also in the South. Kentucky ranks first with a year-over-year increase of more than 20,500 housing units, nearly twice as many as second- and third-place Mississippi and Oklahoma.
Among metro areas with at least 500,000 residents, Baton Rouge, Louisiana, had the largest share of seriously undervalued mortgages in the first quarter, at 13.4%. Neighboring New Orleans came in second with 7.3 percent, followed by Jackson, Miss., and Little Rock, Ark., with 6.5 percent and 6 percent, respectively. Syracuse, New York, came in fifth, with 5.6 percent of homes severely underwater.
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