The fourth quarter of 2012 ended with another 200,000 underwater borrowers moving to a state of positive equity, meaning they no longer owe more on their mortgages than their homes are worth, CoreLogic (CLGX) said Tuesday. The report shows, that while the housing recovery continues, the rate at which negative equity homeowners turn positive is slowing down.
Most of this positive movement is the result of rising home prices, the Irvine, Calif.-based research firm said.
With this development, 38.1 million U.S. properties with a mortgage now have equity, while 10.5 million, or 21.5% of all properties with a mortgage, remain underwater.
Overall, the national aggregate value of negative equity fell by $42 billion to $628 billion at the end of the fourth quarter, down from $670 billion in the third quarter of 2012.
Still, being underwater and having a home nearly paid for are two different states. Of those 38.1 million properties that remain in positive equity, 11.3 million have less than 20% equity.
The average amount of equity for borrowers with a mortgage is 31%, so a large portion of borrowers are far from being mortgage free.
"In the fourth quarter we again saw an improvement in the equity position of households," said Dr. Mark Fleming, chief economist for CoreLogic. "Housing market improvements, particularly in the hardest hit states, are the catalyst for households to regain equity and become participants in 2013's housing market."
As for the states where a large number of borrowers remain underwater, Nevada had the highest percentage of properties with mortgages in negative equity, roughly 52.4% of applicable households.
Florida followed with 40.2% in negative equity.
And despite Arizona’s housing rebound in 2012, 34.9% of properties with a mortgage in the state are underwater. Georgia and Michigan also have negative equity rates of 31.9% and 33.8%, respectively. These five markets alone account for 32.7% of all homes in negative equity across the U.S.