More US Homeowners Underwater on Mortgages

The Wall Street Journal reports on a growing—and unwanted—trend among homeowners. More of them are now underwater on their mortgages, meaning they owe more than their home is worth. The story makes clear that the number of affected homeowners is still relatively small, but it exceeded 500,000 in April, and that's the worst April in five years. The overall problem is nowhere near the level during the financial crisis of 2008, when it wasn't uncommon to see people abandon their homes and let banks foreclose, but the uptick is noticeable.

It may help explain why more people are willing to sell their homes for a loss: A Redfin analysis estimates that 6% of sellers are at risk of doing so, up from 4.4% a year ago. The Journal notes that not everyone in this camp is underwater, but they're willing to sell at a loss before things get worse. The problem is most pronounced in what the story calls "pandemic boomtowns" such as Cape Coral, Florida, and San Antonio, Texas, where buyers paid premium prices only to see home values decline. New Orleans also has a relatively high share of underwater mortgages. (Read the full story, with accompanying charts to explain.)