Since the pandemic housing boom peaked in mid-2022, a handful of Sun Belt markets have experienced significant home price declines, leaving a growing share of homeowners owing more than their properties are worth. According to new data from ICE Mortgage Technology provided to Fast Company, Cape Coral-Fort Myers, Florida, has fallen 18.9% from its peak, while Austin, Texas, has dropped 27.3%—both considered material corrections by analysts.
As of May 2026, 1.5% of outstanding U.S. homeowner mortgages carried negative equity, up from 1% in April 2025, based on ICE Mortgage Technology data. That remains well below the 2009 peak of 23% reported by Cotality/First, but the trend is clearly climbing in the hardest-hit regions.
The data underscores a sharp geographic divergence. While national home equity remains strong overall, the correction in overheated pandemic-era markets—especially in the West, Southwest, and Southeast—is carving out distinct pockets of distress. Cape Coral and Austin stand out for the severity of their price drops, raising concerns about broader contagion in those local economies.
The rise in underwater mortgages, while still small in absolute terms, signals a turning point for homeowners who bought at the top of the market. If price declines continue or deepen, more borrowers could slide into negative equity, potentially straining local housing markets and lenders with concentrated exposure.
ResiClub notes that these regional corrections are modest on a national scale, but for homeowners in the most affected metros, the margin of safety has narrowed considerably.