8% of Mortgaged Homes Purchased in 2022 Considered Underwater

Eight percent of all mortgaged homes bought in 2022 are considered at least slightly underwater.

A new report from Black Knight found that 450,000 borrowers were considered underwater, which is defined as the loan that was taken out for the home is more than the home’s current value, in the third quarter of 2022 and close to 60% of those mortgages were obtained in the first three quarters of 2022. Additionally, 40% of mortgaged properties purchased in 2022 have less than 10% of equity, with 20% of mortgaged homes purchased last year considered low equity. Of those who used a FHA mortgage loan, 25% are underwater, with more than 75% having 10% equity or less.

As the housing market cools, appreciation is slowing down as well. The report found that annualized appreciation in October was 9.3%, down from 10.7% in September, the seventh month of slowdown. Home prices dropped over the course of the year, but fell only 0.43% in October, the least drop so far. Even though home prices are lower than June’s record high, mortgage rates in the 6% to 7% range are still limiting consumers. Additionally, the report found that the number of new homes listed in October was about 20% below pre-pandemic levels. However, negative equity rates representing all mortgaged properties is at 0.84%, defined as “extremely low by historical standards,” according to Black Knight.

For homeowners looking for an affordable market, Pittsburgh was named the fifth most affordable, with a payment-to-income ratio of 26%.

Nearly 20,000 homes started the foreclosure process in October, which is a 6.5% increase, but still remains significantly below pre-COVID levels. In Pennsylvania, the foreclosure rate was 0.5%