'Seriously underwater' mortgages are on the rise throughout the US, with Southern states seeing the biggest jump

• The percentage of "seriously underwater" mortgages rose in the first quarter.
• In the US, 2.7% of homes carry a mortgage that's at least 25% more than the market value of the house.

The percentage of homes in the US that are worth significantly less than the mortgage they secure rose in the first quarter of 2024, according to data from ATTOM.

The share of "seriously underwater" mortgages — defined as having a balance that's 25% more than the fair market value of the house — edged up from 2.6% to 2.7% nationally in early 2024. That translates to roughly one out of every in 37 homes, the real estate firm said in a report on Wednesday.

Though the percentage of seriously underwater mortgaged homes rose slightly nationwide, it remains lower than pre-pandemic levels.

Interest rates have been elevated since 2022 as part of the Federal Reserve's effort to bring down inflation. With that effort, mortgage costs have gone up steadily for about two years, with home loan rates peaking last October at 8% while the market went through a particularly sharp bout of volatility. This week, the rate on the 30-year mortgage is hovering at about 7.1%.

A mortgage can become significantly underwater if a buyer pays much more than what the home may be worth or if they don't have a large equity cushion that can protect against declines in value.

ATTOM said the South and Midwest regions account for nine out of the 10 states with the highest share of seriously underwater mortgages.

Zooming in, Kentucky's share of seriously underwater loans spiked to 8.3% from 6.3% in the quarter, with West Virginia rising to 5.4% from 4.4%. Oklahoma climbed to 6.1% from 5.5%, and Arkansas edged up to 5.7% from 5.2%.

Meanwhile, among 107 metropolitan areas with over 500,000 people, Baton Rouge, Louisiana, topped the list with 13.4% of all mortgages seriously underwater. New Orleans followed with 7.3%, trailed by Jackson, Mississippi at 6.5%, Little Rock, Arkansas at 6%, and Syracuse, New York at 5.6%.