The U.S. housing market is experiencing a worrying trend as nearly 900,000 homeowners find themselves in a precarious position with their mortgages.
Underwater Mortgages Rise In Past 3 Years
A recent report by ICE has revealed that the number of homeowners who owe more on their mortgage than their home’s worth, or are underwater, has reached nearly 900,000. This accounts for 1.6% of all U.S. mortgage holders – the highest level in three years.
Andy Walden, head of mortgage and housing market research at Intercontinental Exchange (ICE), told Market Watch that the recent rise in underwater mortgages is especially troubling for homeowners who bought properties in the past few years with low down payments, particularly in regions with falling housing prices, such as Florida and Texas.
Besides falling home prices, the increase in underwater mortgages is indirectly tied to weak demand from homebuyers.
Walden noted that nearly 90% of homeowners currently underwater on their mortgages took out their loans within the past three and a half years. Most of these troubled loans are backed by the Federal Housing Administration (FHA) or the Department of Veterans Affairs – programs commonly used by first-time buyers, service members, and veterans.
Mounting Woes Of Homebuyers
The increase in underwater mortgages adds to the challenges faced by the housing market. Earlier in September, it was reported that American homeowners saw their equity dip by an average of $9,200 over the past year as rising interest rates cooled the housing market.
First-time buyers have also been struggling to enter the market, with the share of Americans buying their first home falling to a modern low.
Trump’s Mortgage Plan Draws Criticism
Meanwhile, President Donald Trump has proposed a 50-year mortgage plan to address housing affordability, which drew controversy and outrage from within his own party. Rep. Marjorie Taylor Greene (R-GA.) criticized Trump’s proposal for 50-year mortgages, arguing on X that such loans would leave Americans “in debt forever.”
Investor Kevin O’Leary warned that Trump’s proposal would worsen the country’s housing affordability crisis rather than solve it. He said that the real problem isn’t innovative loan structures, but the end of an era when Americans became used to unusually low borrowing costs.