One of the most pernicious effects of the housing bust was the huge number of borrowers stuck in homes worth far less than those properties could be sold for.
Negative equity has been a major drag on mobility and hence the American economy. Being stuck "underwater" means you can't sell your house or often even move out if you get a job someplace else.
Now that problem is easing, ever so slightly, with the recent rebound in home prices. About 100,000 borrowers popped into a positive equity position during the third quarter of 2012, mortgage tracker CoreLogic reported Thursday.
In California, an estimated 1.9 million mortgages were underwater, accounting for about 28.3% of residences with a home loan.
"Through the third quarter, the number of underwater borrowers declined significantly," CoreLogic chief economist Mark Fleming said in a news release. "The substantive gain in house prices made in 2012, partly due to tight inventory caused by negative equity's lock-out effect, has paradoxically alleviated some of the pain."
Nationally, as many as 1.8 million American borrowers could have equity in their home over the next year if prices continue to rise, the firm reported.
CoreLogic said that about 10.7 million homes -- or about 22% of all residential properties with a mortgage -- were in negative equity at the end of the third quarter. Negative-equity mortgages, and those that were in a near-negative-equity position, accounted for 26.8% of all homes with a mortgage.
Negative equity fell to $658 billion at the end of the third quarter, a decrease of $31 billion from the prior quarter. Nevada had the highest percentage of underwater homes at 56.9%. After the Silver State came Florida at 42.1% and then Arizona at 38.6%.
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