"A modest rise in negative equity is emerging across parts of the U.S. housing market, but the overall picture remains far more stable than anything resembling the Global Financial Crisis. Having negative equity-commonly known as being "underwater"-means a homeowner owes more on their mortgage than the home's current market value. According to ICE Mortgage Technology, just 1.0% of U.S. mortgages were underwater in April 2025. By October 2025, that share rose to 1.6%."
"The recent rise in underwater mortgages is concentrated in three areas: VA and FHA loans: These programs typically involve lower down payments, which means borrowers start with thinner equity cushions. When home prices slip even modestly, these homeowners can move underwater more quickly than conventional borrowers. Recent vintages: Borrowers who purchased in 2023, 2024, or 2025-often at elevated price levels and still-tight affordability-have had limited time to pay down their balances. If their local markets have cooled, they're more exposed to negative equity."
National underwater mortgage share increased from 1.0% in April 2025 to 1.6% in October 2025, far below the 23.0% peak during the 2009 foreclosure crisis. The rise is concentrated among VA and FHA loans due to lower down payments and thinner equity cushions, recent vintages (2023–2025) that have had limited time to amortize, and metros that experienced sharp pandemic-era run-ups followed by price corrections. Examples include multiple Florida metros, several Texas cities, and Colorado Springs. National home prices remain near record highs, which helps keep negative equity rare overall.
Read at Fast Company
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