Core Insights - Approximately 1.1 million American homeowners were underwater on their mortgages at the end of last year, representing 2.1% of all mortgage borrowers in the U.S., the highest level since early 2018 and a nearly 60% increase from 696,000 at the start of 2025 [1][4] Group 1: Underwater Mortgages - A homeowner is considered underwater when they owe more on their mortgage than their home is worth, leading to negative equity [2] - The rising share of underwater homeowners may result in reduced for-sale inventory, impacting buyer options in the housing market [2] Group 2: Housing Market Conditions - The increase in underwater homeowners coincides with stagnating home sales and an overall unaffordable housing market for most Americans, with slowing home price increases due to weak buyer demand [3] - An additional 3.2 million borrowers, or 7.9% of the overall population, have less than 10% equity in their homes, indicating a broader issue of low equity among homeowners [4] Group 3: Regional Impact - Home values in the Sun Belt region have declined over the past year, affecting the equity levels of homeowners in those areas [5] - In some cities in Florida, one in ten homeowners were reported to be underwater on their mortgages in 2025 [6]