Nearly 900,000 new homeowners are underwater on their mortgages, signaling a troubling shift in the housing market

Core Insights - Nearly 900,000 homeowners are underwater on their mortgage, representing 1.6% of all mortgage holders in the U.S., the highest rate in three years [1][2] - Existing-home sales are projected to hit a 30-year low, with home prices declining due to weak demand from buyers [3] - Home values in certain regions, such as Austin, Texas, have decreased over the past year, leading some homeowners to owe more than their homes are worth [4] Mortgage Market Analysis - As of the start of Q4 this year, 875,000 mortgage holders owed more on their homes than their current value, although this level is comparable to pre-pandemic figures and the long-term average since 2001, excluding the Great Recession [4] - A significant portion of underwater mortgages, nearly 90%, were taken out in the last 3.5 years, indicating a trend among recent buyers [5] - Two-thirds of underwater mortgages are held by borrowers using FHA and VA loans, which are typically favored by first-time buyers and veterans, allowing for low down payments [6]