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Where Overleveraged Homes are Concentrated

Mortgage rates hit an all-time low recently due to the negative effect of the coronavirus pandemic on the U.S. economy, but in many cities across the country, homeowners are finding that they owe more on their home than their home is worth. Overleveraged homes are strongly concentrated in California. In a new report, WalletHub [1] determined which cities are home to the most overleveraged mortgage debtors by comparing the median mortgage balances against the median income and median home value in more than 2,500 cities.

Though many of the cities are in California, Willis, Texas takes one of the top spots with an overleverage score of 65.61. While the median mortgage debt in Willis is $143,676, the median house value is only $82,300, with a median income of $31,250. WalletHub calculated that the mortgage-to-debt income ratio in Willis is 460%, and the highest mortgage debt-to-house value ratio at 175%.

Bell Gardens, California follows with a median mortgage debt of $276,750, and a median home value of $407,900. However, the median income in Bell Gardens is just $26,576, leading to a mortgage debt-to-income ratio of 1041%. In California, other overleveraged cities include Santa Maria, Santa Ana, Watsonville, Beverly Hills, Imperial Beach, and Bell.

Other cities on WalletHub's list include Johnstown, Pennsylvania, with a median mortgage debt of $70,679, and a median home value of $42,000.

WalletHub also spoke to experts about the current state of the market. Scott Roark, Clinical Professor, Colorado State University, discussed if there certain housing markets or circumstances where it is understandable to be overleveraged in mortgage debt.

"It is certainly difficult to buy in certain markets - housing affordability is a growing crisis in many parts of the country," Roark stated. "The danger with justifying a huge mortgage that puts strain on a household budget (i.e. being "overleveraged") is that it presumes a lot in the future."