The share of borrowers in mortgaged homes who owe more on their loans than the sale of their houses would cover continued climbing steadily in the first quarter, as sustained affordability challenges stifle home price appreciation.

Seriously underwater residential property rates rose to 3.2% from January through March, meaning the combined balances of loans securing those properties were at least 25% more than the properties’ market values. That reflects a rise from 3% during the fourth quarter and 2.8% a year ago.

First-quarter data released Thursday by real estate analytics firm Attom revealed slowing price gains are also shifting household economics for existing borrowers with lower loan-to-value ratios behind their front doors.

The share of equity-rich residential properties eased to 43.3%, its lowest rate since the fourth quarter of 2021 and down from 44.6% in the previous quarter. Homes are considered equity rich if the combined balances of any loans securing the property amount to no more than half of its estimated value.

“Homeowner equity remains relatively strong overall, but we’re seeing signs of moderation,” said Rob Barber, CEO at Attom, in a statement accompanying the figures. Barber added that “the share of equity-rich homes has declined in most markets while the rate of seriously underwater properties is edging up across much of the country.”

In the post-2020 elevated home price environment, mortgage borrowers have been taking out ever-larger loan amounts to finance home purchases. The Mortgage Bankers Association reported recently that the average loan amount of $467,300 on new purchase applications in March was its highest level in MBA survey data going back to 1990.

Elevated mortgage rates, however, have sent downpayment requirements soaring to drive down monthly interest costs and qualify borrowers. Borrowers used a median downpayment 118% higher than 2019 levels in the third quarter of 2025, amounting to roughly 14.4% of the purchase price.

Amid these conditions, cooling home price gains or outright declines can quickly put first-time or lower-downpayment borrowers — sitting on ever higher loan amounts — underwater on their loans. Typically, long-term rising home price trends support cyclicality of underwater mortgage rates as borrowers simultaneously pay down loan principal.

Only six states recorded an annual increase in their share of equity-rich homes during the first quarter, however, led by Illinois, Alaska and South Dakota. States with the highest equity-rich home share were Vermont at 85.7%; New Hampshire at 58.1%; Montana at 57.7%; Rhode Island at 57.2%; and Hawaii at 55.8%.

Seriously underwater rates for mortgaged residential properties rose from a year ago in 45 states and Washington, D.C., with the U.S. capital region experiencing the largest increase, jumping from 3.8% to 5.3% in the first quarter.

Mississippi, Louisiana, Kentucky and Oklahoma followed with the largest annual increases, some of which also face the highest seriously underwater rates in the country. States topping that list in the first quarter were Louisiana at 11.8%; Kentucky at 8.5%; Mississippi at 8%; Oklahoma at 6.6%; and Arkansas at 6.4%.