Cities Where the Most Mortgages Are Underwater

The 2023 U.S. Home Equity & Underwater Report shows that some U.S. homes have underwater mortgages. This is “a combined estimated balance of loans secured by the property of at least 25 percent more than the property’s estimated market value.” As interest rates rise and affect many homeowners, those who own these homes face serious problems. They are supporting homes on which they may never make any money. In the past, this has been a reason for mortgage defaults. (What you need to earn to be middle class in your state.)
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The people with underwater homes face a difficulty most homeowners do not have. Almost half the homes in America are considered equity rich, which means the “combined estimated amount of loan balances secured by those properties was no more than half of their estimated market values.” Only 3% of Americans have underwater mortgages.
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The study looked at 107 markets with populations of over 500,000. Among these, Baton Rouge had the highest percentage of homes with underwater mortgages at 10.8%. Indianapolis followed this at 8.6%. Next was New Orleans (7.2%), Syracuse (6.1%) and Scranton (6.0%). These cities have one thing in common. Their populations are poor.
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In Baton Rouge, 37% of the population is white and 52% is Black. The median value of a home is $191,000, well below the national average.
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Baton Rouge has a median household income of $46,000, well below that national number. The poverty rate is 24%. Presumably, home values in the city have fallen sharply to create the underwater mortgage problem. Or, banks made aggressive loans in comparison to the value of homes. Either way, in the poorest cities, residents will find it hard to solve their mortgage problems.