If you want some peace of mind about the stability of the housing market, you must flash back to real estate\u2019s ugliest moments.<\/p>\n
My trusty spreadsheet<\/a> reviewed a Cotality report for the first quarter of 2026<\/a> detailing a curious measure of housing health that compares borrowings with estimated values for 49 states \u2013 Vermont wasn\u2019t included, and the District of Columbia. That gap is what\u2019s called a homeowner\u2019s equity \u2013 the byproduct of down payments, housing appreciation and swings in loan balances.<\/p>\n The warning signals can be hidden within the concept of \u201cunderwater\u201d mortgages, also known as negative equity. That\u2019s when borrowers owe more than a property is worth \u2013 upping the risks they\u2019ll walk away from the home, defaulting on the home loan if financial conditions worsen, since they have no equity to lose.<\/p>\n Cotality\u2019s figures show that California had 55,568 underwater properties as of the first quarter of 2026. That was the fourth-highest among the states, behind some economic archrivals: Texas at 91,568 and Florida at 69,431. No. 3 was New York at 55,629.<\/p>\n But before you gulp, note that California\u2019s underwater loans are just 5% of the nation\u2019s 1.2 million. Meanwhile, California has 11% of the nation\u2019s mortgaged homes.<\/p>\n So just 0.7% of California\u2019s mortgages are underwater. That\u2019s the lowest share among the states and less than half of the nation\u2019s 1.7% rate. No. 2 was Nevada at 0.71%, followed by Hawaii at 0.9%. Florida was seventh-lowest at 1.1%.<\/p>\n Where are underwater mortgages most common?<\/p>\n Louisiana\u2019s 5.6%, Iowa\u2019s 4.8% and South Dakota\u2019s 4.1%. Texas ranked No. 30 at 1.7%.<\/p>\n Where we were<\/p>\n How few are today\u2019s underwater mortgages?<\/p>\n Go back to the real estate debacle of the Great Recession, spurred largely by shoddy and aggressive lending practices.\u00a0Once folks couldn\u2019t afford those loans, foreclosures skyrocketed, and home values tanked.<\/p>\n As a result, between 2009 and 2013, California\u2019s share of underwater mortgages peaked at 37%.<\/p>\n Yes, there was a time when more than one-third of Californians owed more than their home was worth.<\/p>\n It wasn\u2019t some California craziness. The nation\u2019s peak was 26%. And five states topped the Golden State: Nevada at 73%, Arizona at 54%, Florida at 51%, Michigan at 42%, and Georgia at 40%.<\/p>\n They were ugly times, and today\u2019s conditions can\u2019t compare.<\/p>\n By the way, underwater mortgages peaked in Texas at 13%. Its lending laws throttled much of the mortgage madness that fueled a housing bubble that eventually burst.<\/p>\n What\u2019s next?<\/p>\n Underwater mortgages weren\u2019t growing in early 2026.<\/p>\n Home values remain stubbornly high, and most lenders have been stingy about who gets a loan, taking an ultra-cautious approach dating back to reforms following the Great Recession.<\/p>\n In the past year, California\u2019s number of underwater mortgages was essentially flat, while the nation\u2019s total fell by 9%.<\/p>\n These troubled loans jumped in just one state: South Dakota, up 45%. Florida did have the fourth-highest increase, but it was only 4%.<\/p>\n Underwater loans fell most in New York, off 24%, Illinois, off 23%, and Alaska, off 21%. And Texas was off 11%.<\/p>\n California housing has plenty of challenges, but shaky mortgages isn\u2019t one of them.<\/p>\n Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com<\/a><\/p>\n