Seriously delinquent loans increased slightly from last quarter, but are down significantly from last year, according to the Q1 2017 U.S. Home Equity and Underwater Report from ATTOM Data Solutions, a multi-sourced property database.

Homes that are seriously underwater, where the combined loan amount secured by the property was at least 25% higher than the property’s estimated market value, dropped 1.2 million from last year’s 6.7 million to 5.5 million in the first quarter of 2017. However, this is up from the fourth quarter’s 5.4 million.

“While negative equity continued to trend steadily downward in the first quarter, it remains stubbornly high in often-overlooked pockets of the housing market,” said Daren Blomquist, ATTOM senior vice president.

“For example, we continue to see one in five properties seriously underwater in several Rust Belt cities along with Las Vegas and central Florida,” Blomquist said. “Additionally, close to one-third of homes valued below $100,000 are still seriously underwater.”

The 5.5 million seriously underwater homes at the end of the first quarter represented 9.7% of all U.S. properties with a mortgage, up from 9.6% in the fourth quarter but down from 12% in the first quarter last year.

The report is based on publicly recorded mortgage and deed of trust data collected and licensed by ATTOM Data Solutions along with an industry standard automated valuation model updated monthly in the ATTOM Data Warehouse of more than 150 million U.S. properties.

“Several of the cities with the biggest quarterly increases in underwater properties saw a corresponding increase in share of distressed sales in the first quarter, creating a drag on overall home values, and in the case of Baton Rouge that increase in distressed sales may be in part attributable to the catastrophic flooding there in August 2016,” Blomquist said. “Across the country, the share of seriously underwater homes was higher in high-risk flood zones.”

Of the 88 metro areas with a population of at least 500,000 or more, those with the largest quarterly increase in the number of serious underwater homes were Baltimore, Maryland, up 26,974 homes, Philadelphia, Pennsylvania, up 8,919, McAllen, Texas, up 7,746, Cleveland, Ohio, up 7,631 and St. Louis, Missouri, up 6,844.

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