It’s awfully hard to find a property owner in Southern California who owes more on the home than what it’s worth.
My trusty spreadsheet looked at a Cotality report tracking “underwater mortgages” for the first quarter of 2026 – a troublesome situation in which the borrower’s balance owed is larger than the estimated value of their home – in the 100 U.S. markets with the most mortgages.
Underwater homeowners have a bad habit of walking away from their mortgages when financial conditions sour, whether due to personal circumstances or broader economic conditions. Widespread underwater loans amplified numerous other real estate problems in the mid-2000s, leading to the Great Recession’s housing crash.
Early in 2026, Orange County had only 39 underwater home loans for every 10,000 mortgages. That’s the lowest share in the first quarter among those 100 U.S. markets.
Orange County has 2,300 of these worrisome loans, a group that’s grown 2% in a year.
Locally speaking
Here’s how other Southern California housing markets fared in this study, ranked by their national standing:
– Ventura County: 58 per 10,000 mortgages underwater, the third-lowest nationally. That’s just 1,100 loans where the amount owed exceeds the home’s value, a group that’s shrunk by 0.2% in the past year.
– San Diego County: 61 per 10,000, fourth-lowest nationally – 4,100 loans, off 2.5% in a year.
– Los Angeles County: 106 per 10,000, 10th-lowest nationally – 17,200 loans, up 0.8% in a year.
– Inland Empire: 107 per 10,000, 13th-lowest nationally – 11,000 loans, off 0.3% in a year.
The rarity of underwater loans in Southern California can be attributed to stingy lenders, who have been stricter since the Great Recession about who gets a mortgage, and to the region’s stubbornly high home prices, which keep borrowers’ property values intact.
Region vs. region
How rare are these problematic loans locally?
Southern California had a combined 87 underwater mortgages per 10,000. That’s a total of 35,800 loans, a tally that’s dropped 0.2% in a year.
Contrast that with the six other California markets, with slightly more underwater borrowers: 102 underwater loans per 10,000. That’s 23,400 loans combined, off 5% in a year.
Note that San Jose had the nation’s second-lowest share of underwater loans, 54 per 10,000 – that’s 2,100 loans, off 2.1% in a year. And San Francisco was fifth-lowest, 83 per 10,000 or 2,400 loans, off 21% in a year.
Contemplate that both slices of the Golden State are far better off than the 89 markets in the rest of the U.S., where there were 208 underwater loans per 10,000. That’s 910,000 mortgages, up 0.2% in a year.
The nation’s highest rate was found in New York’s Long Island – Nassau and Suffolk counties – at 669 per 10,000 loans. That’s 53,000 mortgages, off 1.5% in a year.
Or ponder California’s success this way: The 11 Golden State markets in the top 100 account for 14% of total mortgages outstanding but only 7% of all underwater loans.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
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