Approximately 1.2 million U.S. homeowners were in negative equity — meaning they owe more on their mortgage than the home is worth — as of Q1 2026, representing 2.1 percent of all outstanding mortgages and nearly double the rate from one year prior, according to data published by ForeclosureDataHub. In Austin, 9.2 percent of mortgages are underwater, more than four times the national average.
What Happened
Negative equity rose from approximately 1.3 percent to 2.1 percent of outstanding mortgages between Q1 2025 and Q1 2026 — a roughly 60 percent increase in the share of underwater homeowners in twelve months. Total equity losses nationally reached $374 billion.
Texas accounts for more than 10 percent of all FHA loans nationwide, and the FHA delinquency rate hit 11.52 percent in Q4 2025 — the highest level since 2021. In Austin specifically, approximately 65 percent of 2022 FHA loans are currently underwater, driven by the market's sharp price correction following the 2021–2022 peak.
Nationally, 77 percent of metros are now showing rising foreclosure rates, up from fewer than 50 percent in late 2025. The foreclosure inventory rate reached 0.4 percent in March 2026 — its highest level in six years. Q1 2026 foreclosure filings totaled 118,727 properties, up 26 percent year over year.
| Negative Equity Metric | Q1 2026 |
|---|---|
| Underwater homeowners nationally | 1.2 million |
| Share of all mortgages | 2.1% (up from ~1.3%) |
| National equity loss | $374 billion |
| Austin underwater rate | 9.2% (vs. 2.1% national) |
| Austin 2022 FHA loans underwater | ~65% |
| Texas share of U.S. FHA loans | >10% |
| FHA delinquency rate (Q4 2025) | 11.52% — highest since 2021 |
| Metros with rising foreclosure rates | 77% |
Why It Matters
Negative equity eliminates both exit paths that distressed homeowners typically rely on. A homeowner who is underwater cannot sell traditionally — the proceeds from a market-rate sale would not cover the mortgage balance. They also cannot refinance — lenders will not refinance a loan where the collateral is worth less than the debt.
This creates a specific trap: the homeowner may be current on payments but has no financial flexibility. One job loss, one divorce, one medical event, or one property tax increase removes the ability to stay current. And once payments are missed, the lack of equity means there is nothing to preserve through a voluntary sale.
ForeclosureDataHub describes this as the removal of "both escape hatches" — the conditions that historically allowed distressed homeowners to exit before losing the property entirely.
What This Means for DFW Homeowners
For Austin homeowners, the 9.2 percent underwater rate means roughly 1 in 11 mortgage holders cannot sell their home for what they owe. For those also facing financial stress — job loss, divorce, inheritance complications — the situation is urgent.
In DFW, prices have held more steadily than in Austin's post-peak correction. But FHA borrowers who purchased in 2022 at elevated prices may face similar exposure in submarkets where values have softened.
For homeowners approaching negative equity — where the home's current market value is close to the outstanding mortgage balance — a cash sale while equity still exists is a materially different outcome than waiting. A home with $15,000 in equity can still produce proceeds. A home that crosses into negative equity may not.
Creative finance structures — including subject-to transactions, where the buyer absorbs the existing mortgage — can sometimes resolve situations that a traditional or cash sale cannot.
Related: Can I Sell With a Mortgage? → · Subject-To: What Podcasts Don't Tell You → · What Is a Short Sale? →
Sources: ForeclosureDataHub — Underwater Mortgages 2026 · ATTOM Foreclosure Rates by State