California’s sluggish homebuying pace may be on par with Great Recession lows, but one measure of mortgage weakness is far better than what was seen in real estate’s ugliest days.

My trusty spreadsheet reviewed a Cotality report for the first quarter of 2026 detailing a curious measure of housing health that compares borrowings with estimated values for 49 states – Vermont wasn’t included, and the District of Columbia. That gap is what’s called a homeowner’s equity – the byproduct of down payments, housing appreciation and swings in loan balances.

Housing’s warning signals can be hidden within the concept of “underwater” mortgages, also known as negative equity. That’s when borrowers owe more than a property is worth – upping the risk they’ll walk away from the home and default on its loan if financial conditions worsen, since they have no equity to lose.

Cotality’s 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.

But before you gulp, note that California’s underwater loans are just 5% of the nation’s 1.2 million. Meanwhile, California has 11% of the nation’s mortgaged homes.

So just a 0.7% share of California’s mortgages are underwater. That’s the lowest percentage among the states and less than half of the nation’s 1.7% rate. No. 2 was Nevada at 0.71%, followed by Hawaii at 0.9%. Florida was seventh-lowest at 1.1%.

Where are underwater mortgages most common? Louisiana’s 5.6%, Iowa’s 4.8% and South Dakota’s 4.1%. Texas ranked No. 30 at 1.7%.

California’s minimal underwater loans stand in stark contrast to a steep sales freeze linked to unaffordable pricing.

There were 320,900 statewide home purchases in the 12 months through April, according to Attom. That’s 26% below the historic pace and even less than the Great Recession’s slowest clip.

Go back to the real estate debacle of the Great Recession, spurred largely by shoddy and aggressive lending practices. Once folks couldn’t afford those loans, foreclosures skyrocketed, and home values tanked.