Selling a House You Still Owe More On Than It’s Worth

What the Mid-2026 Data Says About Underwater Mortgages

If you owe more on your mortgage than your house would bring in a sale, you are not imagining that the headlines have gotten louder. As of mid-2026, roughly 813,000 borrowers nationwide were underwater at the end of June — up 44% from a year earlier — according to ICE’s August 2026 Mortgage Monitor. Separately, ATTOM’s Q1 2026 Home Equity & Underwater Report found 3.2% of mortgaged homes were “seriously underwater” (owing at least 25% more than the home’s value), up from 2.8% a year before.

Here’s the twist in that same ICE report: total mortgage-holder equity hit a record $18 trillion in the second quarter of 2026, and the average borrower is sitting on about $212,000 in tappable equity. Both things are true at once. Most homeowners have never had more equity — while a fast-growing minority has none at all.

Two Very Different Readings of the Same Numbers

The mainstream, data-backed view: underwater loans remain rare by historical standards — still well below pre-pandemic levels — and the problem is concentrated far from California. Texas and Florida alone account for 39% of all underwater homes, with the worst metros being Cape Coral, FL (11.4% negative equity) and San Antonio, TX (6.9%). ICE specifically notes underwater mortgages are especially rare in the Bay Area and Southern California.

The alarmist view: a 44% one-year jump feels like 2008 all over again, especially since 320,000 of those underwater borrowers are also behind on payments — nearly double a year ago. Why the gap between the two camps? The percentage growth is coming off a very small base, and the profile of who is underwater matters: ICE estimates 85% of underwater loans were originated in 2022 or later, and 75% were low-down-payment FHA or VA loans. This is a thin slice of recent buyers in overbuilt Sun Belt markets — not a nationwide credit collapse. The alarmist take borrows 2008 imagery; the loan-level data doesn’t support it.

What It Means for Central Valley Homeowners

Fresno never overheated the way Austin or Cape Coral did, so true negative equity is rarer here. But “not underwater on paper” and “walking away with money at closing” are two different things. If you bought recently with a small down payment, the cost of a traditional sale — agent commissions, seller closing costs, repair credits after inspection, and months of holding costs — can turn a paper-positive sale into a check you write at the closing table. Before assuming anything, run the real numbers:

• Your exact mortgage payoff (call your servicer — it’s higher than your statement balance)
• Agent commissions, typically around 5–6% of the sale price
• Seller closing costs, often another 1–3%
• Repair credits or price cuts after the buyer’s inspection
• Every month of payments, taxes, and insurance while you wait for a buyer

If that math comes out barely positive or negative, a direct cash sale — no commissions, no repair negotiations, no months of holding costs — can flip the outcome. You can get a cash offer today and simply compare the net numbers side by side. And if you’re genuinely underwater and falling behind on payments, you have more options than you may think — reinstatement, loan modification, or a lender-approved short sale — which we walk through in our guide to avoiding foreclosure in Fresno. This is general information, not legal advice.

Two Ways to Think About It

If you’re current on payments and don’t have to move: time is your friend. Every payment pays down principal, and Central Valley prices haven’t seen the declines hitting Texas and Florida. Waiting a year or two while your balance shrinks is often the cheapest way out of thin equity.

If you’re behind on payments, or a job change, divorce, or inherited situation forces a sale now: speed usually matters more than squeezing out the last dollar. Missed payments add fees and interest to your payoff every month, so the hole gets deeper while a listed home sits on the market. A cash buyer can close in days rather than months — whether the house is in Fresno or Clovis — and if your payoff truly exceeds the home’s value, an experienced local buyer can work with your lender on a short sale instead of letting foreclosure decide the timeline for you.

What Do You Think?

Is the rise in underwater mortgages an early warning, or just a Sun Belt story that skips the Central Valley? If you’ve run your own sale numbers and they came out tighter than expected, we’d like to hear about it — reach out anytime and we’ll help you pencil it out, no obligation.