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Falling home prices are hitting homeowners in these 10 states the hardest — with up to 10% of mortgage balances now topping their property values

Falling home prices are hitting homeowners in these 10 states the hardest with up to 10% of mortgage balances now topping their property values

Christine Ji

Downtown Baton RougeCrackerClips Stock Media/Shutterstock

Home prices are falling, but that's not always a good thing.
In some areas, it's causing mortgage balances to exceed the actual property value.

After years of rapidly skyrocketing home values, falling prices might sound like a breath of fresh air to those looking to buy a home.

However, falling home prices aren't always a good thing. Sometimes, they're a signal of wider economic decline in a region.

Real estate data provider ATTOM analyzed values for over 155 million properties across the US in the second quarter of 2024 and found that home prices are plummeting in certain areas.

Home price declines can lead to a surge in underwater mortgages, or when the amount owed on a home loan exceeds the home's value. ATTOM defines a seriously underwater mortgage as a home with a loan-to-value ratio of 125% or above.

Underwater mortgages can happen for a variety of reasons. Economic downturns and natural disasters can result in falling home prices. Other reasons include rising unemployment and population decline within neighborhoods when particular industries crucial to local economies suffer, the report said.

Although many areas of the US have seen healthy home value appreciation in the last few years, some states are dealing with spiraling home prices and seriously underwater mortgages.

This phenomenon is occurring primarily in southern and midwestern states, which are often lower-priced markets, according to ATTOM.

The economies of fossil fuel producing states such as Louisiana, Oklahoma, and Kentucky are slowing as demand for alternative energy sources increases. With sluggish economic activity and declining employment, real-estate prices are dropping as people struggle to afford homes.

Population decline is making the issue worse, too. As people move out of midwestern and southern states in search of better jobs and economic prospects, real-estate prices decline as well.

Luckily, there's room for improvement in these markets. Homeowners with underwater mortgages can get relief if the housing market stabilizes and their home values increase.

ATTOM CEO Rob Barber believes buyer demand has increased across the country this summer, which should boost home prices. As interest rates continue to drop, the housing markets in these states will benefit as well.

Below are the top ten states with the largest proportion of seriously underwater mortgages in the second quarter of 2024.

10 states with the highest percentage of seriously underwater mortgages