Minnesota’s housing market is moving towards a more balanced footing despite a sharp rise in the proportion of mortgaged homes classified as “seriously underwater”, local real estate experts say.
Data from property analytics firm ATTOM shows 12.1% of Minnesota homes fell into that category during the second quarter of 2026 — the highest rate of any US state and up from 2.6% a year earlier.
ATTOM defines a seriously underwater property as one where the outstanding mortgage debt is at least 25% greater than the home’s estimated market value. Nationally, the figure stood at 3.2% during the same quarter.
Minnesota housing market shows signs of balance
Wendy Uzelac, president of Minnesota Realtors, said the figures should be considered alongside completed sales, foreclosure levels and longer-term trends rather than viewed in isolation.
She said home prices appeared to be settling after the exceptional activity seen during the pandemic, when properties attracted multiple offers and buyers moved rapidly between homes.
“Back to what it was a little bit before the craziness of the pandemic years where everybody was moving around and houses had so many multiple offers,” Uzelac said.
Uzelac added that a weaker equity position did not necessarily indicate that a borrower was unable to meet their mortgage payments, particularly where the homeowner had a sound financial profile.
“Being slightly behind in your equity position doesn’t exactly equal not being able to pay,” she said.
Recent figures from Minnesota Realtors point to a market with more supply and increased activity. Its July report found that statewide inventory had risen 9.1% year-on-year to 20,084 homes, the highest level for the month in seven years. Closed sales were up 11.2%, while the median sale price increased 2.7% to $375,000.
The organisation said the state had recorded its most balanced July market since 2017, although housing remained undersupplied and conditions continued to vary by price range, property type and location.
Uzelac said Minnesota Realtors placed greater emphasis on transactions that had actually completed than on estimates of potential losses in value.
“We go by the data that is proven, meaning homes that have closed, sales that have happened,” she said.
She said foreclosure figures placed Minnesota in the middle of the national picture and argued that short-term changes in equity should not obscure the longer-term value of home ownership.
Prospective buyers and sellers were advised to seek guidance from a local estate professional, as conditions can differ significantly between regions and even neighbouring communities across Minnesota.
