Borrower equity reached a four-year low in the fourth quarter of 2025, while underwater mortgages hit its largest share in nearly three years, according to a new industry report.
Less than 45% of mortgage residential properties in the United States were considered equity-rich last quarter, meaning that the combined estimated amount of loan balances secured by those properties was no more than half of their estimated market values, according to Attom's latest home equity and underwater report. That's a 1.5-percentage-point drop from the third quarter's 46.1%.
The share of properties seriously underwater, those that have combined estimated loan balances that exceed estimated market values by at least 25%, rose to 3% in the fourth quarter
But both are not intrinsically bad.
"After years of rapid gains, homeowner equity is settling into a more sustainable range, and that's not a negative sign for the market," Attom CEO Rob Barber said in a press release Tuesday. "Even with a modest pullback in equity-rich properties and a slight uptick in seriously underwater homes, overall equity levels remain remarkably strong by historical standards."
The percentage of homes that were equity-rich in the fourth quarter remained significantly above the 26.7% mark recorded in late 2019. Home equity saw a sharp rise during the pandemic, reaching a peak of 49.2% in the second quarter of 2023 and 2024.
"As we move toward the spring buying season, these numbers suggest a housing market that is stabilizing rather than overheating, giving homeowners a solid financial foundation while allowing for healthier market dynamics," Barber said.
Home equity could be dropping in part due to
Which states were affected most?
The portion of mortgaged homes that were equity-rich decreased in 42 states quarterly and annually, the report said.
Florida led the annual declines, dropping from 50.9% to 43.9%, and was followed by Kentucky (-6.4 percentage points), South Carolina (-5.8 percentage points), New Mexico (-5.6 percentage points) and Arizona (-5.4 percentage points).
On the other hand, increases were most common in the Midwest and Northeast, as Alaska (2 percentage points), North Dakota (1.3 percentage points), Illinois (0.7 percentage points), South Dakota (0.5 percentage points) and New York (0.5 percentage points) made up the top five, according to the report.
Still, Vermont led the nation with the highest shares of equity-rich mortgaged homes by a wide margin at 87%, while Louisiana found itself at the bottom with 20.1% shares.
The Dakotas found themselves at the top of list for biggest annual improvements in seriously underwater mortgages as well, dropping 0.5 and 0.3 percentage points, respectively. The largest year over year increases were in Mississippi, up from 6.4% to 8.3%, and Kentucky, up from 6.1% to 7.9%, the report found.
