The number of homeowners who owe more on their mortgage than the property is worth rose nearly 3% in the fourth quarter as home prices and values declined. CoreLogic (CLGX) said 11.1 million residential properties, or 23.1% of all U.S. homes, were in negative equity at Dec. 31, up from 10.8 million, or 22.5%, the prior quarter. The total negative equity held by the nation's homeowners rose to $751 billion for the fourth quarter from $744 billion at Sept. 30, but down from $800 billion a year earlier. The number of upside down mortgages declined through the first three quarters of 2010, as more properties were foreclosed upon. "Negative equity holds millions of borrowers captive in their homes, unable to move or sell their properties," CoreLogic Chief Economist Mark Fleming said. "Until the high level of negative equity begins to recede, the housing and mortgage finance markets will remain very sluggish." The data analytics firm said another 2.4 million homeowners had less than 5% equity in their property in the fourth quarter, indicating 27.9% of all mortgages are in negative equity or near-negative equity. CoreLogic said 65% of all homeowners in Nevada are underwater on their mortgage, and the Silver State has the highest average loan-to-value ratio at 118%. Conversely, New York homeowners have an average LTV ratio of 50%. Arizona, California, Florida and Michigan continue to have the large numbers of homeowners upside down on their mortgages. CoreLogic said the possible 20% down payment that may be required under the forthcoming definition of a qualified residential mortgage should make the loans cheaper to originate. "Clearly, higher down payments are necessary to reduce credit risk for lenders and securitizers," the company said. "But given the majority of homebuyers are repeat buyers who use current equity as the bulk of their equity, states that have a lower proportion of borrowers with 80% LTV or less will be adversely affected because repeat buyers will not have sufficient down payments to buy new homes with QRMs." CoreLogic said total negative equity is set to rise another 10 points if home prices fall 5% to 10% as projected in 2011. In February, CoreLogic said home prices at the end of 2010 were 31.6% lower than the peak in April 2006. The latest Standard & Poor's/Case Shiller showed home priced declined 2.4% in December. "Given price declines, the largest risk to future increases in negative equity lies in Alabama, Idaho and Oregon which have a high share of loans that are near negative equity and rapid home price depreciation," the company said. Write to Jason Philyaw.