Bought a home between 2022 and 2025? You could be most vulnerable to this housing market shift

The share of homeowners sitting pretty on a huge chunk of home equity just hit a nearly five-year low. 

In a new report, property data company Attom found that just 41% of U.S. homes with mortgages were equity-rich in the second quarter, down from 43% in the first quarter of the year. That might not sound like a huge drop, but just a year ago 47% of homes met the same criteria. To qualify as equity-rich for the report’s puposes, a homeowner’s mortgage balance needed to be no more than half the estimated market value of their home. 

According to the data, published in Attom’s 2026 U.S. Home Equity & Underwater Report, the new milestone marks the fourth straight quarter of decline. During the same period, 3.2% of homes could be categorized as “seriously underwater,” with loan balances totaling more than 25% over their estimated market value. That rate stayed steady from earlier this year, but marks a meaningful uptick of 2.7% from the same time period in 2025.

“These two measures of home equity strength, the rates of equity-rich and seriously underwater homes, remain healthier than they were prior to 2020,” Attom CEO Rob Barber said in the report. “However, both have been moving in less favorable directions over the past year, suggesting a trend worth watching.”

Like all real estate trends, local stories around home equity vary in 2026. Quarter-over-quarter, 13 states saw their rates of equity-rich homes rise, but only four states experienced a rise from 2025 to 2026. States with rising year-over-year home equity rates were North Dakota, South Dakota, Kentucky, and Wyoming. Of those states, North Dakota led the pack with a share of equity-rich homes that rose by nearly three percent into 2026. 

The states with the biggest share of equity-rich homeowners were all over the map, led by Vermont at 79%. In Montana, Rhode Island, South Dakota, and New Hampshire, homes with a significant portion of equity make up more than half of all mortgaged homes.

On the other side of the coin, most states saw their portion of equity-rich homes fall. Minnesota saw the biggest annual drop (38% to 20%), with Michigan, California, Washington, and Missouri all experiencing declines of roughly 10% or more. Worryingly, 18 states saw their proportion of seriously underwater homes rise in the second quarter, and 33 states saw a rise year-over-year. In Minnesota and Louisiana, more than 1 in 10 homes could be considered seriously underwater and Arkansas, Iowa, and Mississippi all have more than 6% of their mortgaged homes in the category.