What does it mean if a property is "underwater"?

When a property is described as "underwater," it indicates that the current market value of the property has fallen below the outstanding balance on the mortgage. This situation arises when homeowners owe more on their mortgage than their property is worth.

This can happen due to various reasons, including market downturns, economic conditions, or changes in the neighborhood that negatively affect property values. As a result, homeowners may find themselves in a difficult financial position since selling the property would not yield enough funds to pay off the mortgage, leading to potential financial strains or foreclosure risks.

In contrast, the other options suggest scenarios that do not align with the definition of being "underwater." The stability of the market value, the presence of positive homeowner equity, or the type of mortgage interest rate do not pertain to the fundamental concept of a property being underwater. These aspects relate to the overall financial health of the mortgage but do not directly define the underwater condition itself.