Homeowner equity across the United States softened modestly in the final months of 2025, signaling a housing market that is losing some of the rapid momentum built during the pandemic-era boom but still resting on a comparatively solid financial foundation.
New data from ATTOM show that 44.6% of mortgaged residential properties were classified as “equity-rich” in the fourth quarter, meaning outstanding loan balances were no more than half of a home’s estimated market value. The figure slipped from 46.1% in the third quarter and retreated further from a recent high of 49.2% reached in mid-2024. Even with the decline, the share remains well above pre-pandemic norms and far stronger than early-2020 levels, when roughly one quarter of homeowners held that degree of equity.
At the opposite end of the spectrum, financial distress edged up only slightly. About 3.0% of mortgaged homes were deemed “seriously underwater” in the fourth quarter–defined as properties where loan balances exceed market value by at least 25%–up from 2.8% in the prior quarter. The increase was marginal and keeps negative-equity exposure near historic lows.
ATTOM Chief Executive Rob Barber characterized the shift as a normalization rather than a warning sign, noting that elevated equity positions built over several years are now settling into what he described as a more sustainable range heading into the spring 2026 buying season.
Equity Pullbacks Widespread but Uneven by State
The moderation in equity was broad-based. Forty-two of 49 states tracked posted quarterly declines in the share of equity-rich mortgages, most by less than two percentage points. The same number registered year-over-year drops, underscoring that the cooling trend has been developing for several quarters rather than emerging abruptly.
Some of the largest annual pullbacks occurred in high-growth Sun Belt and Southeastern markets. Florida, Arizona and South Carolina all posted notable declines from year-earlier levels, joined by Kentucky and New Mexico. Despite those reductions, equity concentrations in many of these states remain elevated compared with long-term averages.
A smaller group of states moved in the opposite direction. Gains were most visible across parts of the Northeast and Upper Midwest, including Alaska, North Dakota, Illinois, South Dakota and New York, each recording modest year-over-year increases in equity-rich shares.
Negative Equity Largely Contained
Serious negative equity remained limited nationwide, with only incremental changes quarter to quarter. Improvements were concentrated in sparsely populated Western and Plains states such as North Dakota, South Dakota, Wyoming and Idaho, where the portion of deeply underwater mortgages declined from a year earlier.
In contrast, several Southern markets experienced noticeable deterioration. Mississippi and Louisiana posted some of the largest annual increases in seriously underwater properties, while Kentucky, Maryland and the District of Columbia also saw measurable upticks. Even so, the national rate remains a fraction of levels seen following the 2008 housing crisis.
Coastal and Northeastern States Dominate Equity Rankings
High-cost coastal markets and parts of New England continued to lead the nation in homeowner equity. Vermont stood out with an exceptionally large majority of mortgaged homes considered equity-rich, followed by New Hampshire, Rhode Island and Maine. Western states including Montana, California and Hawaii also ranked near the top, reflecting years of price appreciation and constrained housing supply.
By contrast, lower equity concentrations were more common in portions of the South and Midwest. Louisiana ranked last among states, while Maryland, Kentucky, Iowa and the District of Columbia also posted comparatively small equity-rich shares. The geographic divide highlights how long-term price growth and affordability dynamics continue to shape household balance sheets.
County Data Show Midwest Strength, Southern Weakness
At the county level, the strongest equity positions were heavily clustered in the Midwest, particularly across Michigan and Wisconsin. Several smaller counties in those states reported equity-rich shares exceeding 90%, joined by select locations in Vermont.
Among large-population counties, technology- and finance-driven coastal markets dominated the upper tier. California’s Santa Clara, Orange and San Mateo counties–along with New York’s Nassau and Suffolk counties–posted the highest equity-rich proportions among jurisdictions with more than 500,000 residents.
The weakest equity readings were concentrated in the South, especially in Louisiana and Mississippi, with additional low-ranking counties scattered across Kentucky, Georgia, South Carolina and Oklahoma. Large urban jurisdictions around Baltimore and Washington, D.C., also appeared near the bottom of the list.
Zip-Code and Metro Trends Reinforce Regional Divide
Granular data point to the same regional pattern. Roughly one-third of U.S. zip codes with significant mortgage activity had at least half of properties classified as equity-rich, with California and Massachusetts accounting for a disproportionate share of the highest-ranking areas.
Meanwhile, states with the largest concentrations of seriously underwater mortgages were overwhelmingly located in the Midwest and South, led by Louisiana, Mississippi and Kentucky. Northeastern and West Coast states generally recorded the lowest shares of deeply negative equity, with Vermont, Rhode Island and New Hampshire at the bottom of the distress rankings.
Among major metropolitan areas, Baton Rouge and New Orleans posted the highest proportions of seriously underwater loans, followed by Jackson, Lexington-Fayette and Memphis. Even in those markets, however, the overall percentage of deeply distressed mortgages remained in the single digits.
Only a small fraction of U.S. zip codes–less than 3%–reported seriously underwater shares above 10%, indicating that severe negative equity is confined to relatively limited pockets rather than representing a systemic national risk.
Ultimately, U.S. homeowners closed 2025 with slightly thinner equity cushions than a year earlier, but balance sheets remain broadly resilient. The data point to a market transitioning from rapid appreciation toward steadier conditions, with regional disparities widening even as nationwide distress stays subdued.
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