Core Insights - The housing market has seen significant price corrections in certain regions, particularly in Cape Coral and Austin, with declines of -19.1% and -27.8% respectively from their peaks [1] Group 1: Mortgage Borrowers and Negative Equity - The share of U.S. homeowner mortgages with negative equity is projected to rise to 2.1% by the end of December 2025, up from 1.3% in December 2024 [3] - Historically, the share of outstanding homeowner mortgages with negative equity was 23.0% at the end of September 2009 [3] Group 2: Reasons for Limited Negative Equity - Nationally aggregated existing home prices remain close to all-time highs, mitigating the impact of regional price declines [4] - Many homeowners locked in ultra-low mortgage rates during the Pandemic Housing Boom, with 51.5% of outstanding mortgage holders having rates below 4.0% as of Q4 2025, allowing for faster equity build-up [4] - A limited number of buyers purchased at the peak in correction markets, which has helped prevent widespread negative equity issues [4]

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]