The number of homeowners in the U.S. who owe more on their properties than what those homes are worth has declined steadily for most of 2010, according to statistics released Monday.
But the drop in properties with negative equity has more to do with troubled borrowers losing their homes to foreclosure than an increase in prices.
About 10.8 million, or 22.5%, of all residential properties with mortgages were in negative equity positions at the end of the third quarter, according to Santa Ana research firm CoreLogic. That is down from 11 million, or 23%, in the second quarter.
The number of underwater borrowers declined by more than 500,000 during the first nine months of 2010, according to CoreLogic.
"Negative equity is a primary factor holding back the housing market and broader economy," CoreLogic Chief Economist Mark Fleming said. "The good news is that negative equity is slowly declining, but the bad news is that price declines are accelerating, which may put a stop to or reverse the recent improvement."
About 2.4 million borrowers had very little equity, less than 5%, at the end of the third quarter. Underwater and near-underwater loans accounted for 27.5% of all U.S. mortgages.
In the Los Angeles metro area, about 378,200, or 24.5%, of homeowners with a mortgage were underwater in the third quarter, and roughly 61,400, or 4%, were near negative equity.
The states with the most underwater mortgages at the end of the third quarter were Nevada, with 67%; Arizona, 49%; Florida, 46%; Michigan, 38%; and California, 32%.