Rising home prices propelled 3.5 million U.S. properties out of negative equity in one year, but the number of underwater mortgages will shrink at a slower pace in the future as price appreciation cools, according to data released today by CoreLogic and Trulia.

Approximately 6.3 million properties, or 12.7 percent of all U.S. mortgaged properties, were underwater in the first quarter of 2014, according to CoreLogic.

That’s down from 6.6 million homes, or 13.4 percent of all U.S. mortgaged properties, in the fourth quarter of 2013, and 9.8 million homes, or 20.2 percent of all mortgaged properties, from a year before.

negative equity

Source: CoreLogic

The rapid price appreciation that has lifted so many homeowners out from underwater has slowed recently. Asking prices were up 8 percent in May from a year ago, the smallest bump in 13 months but still far above the historical norm, according to the latest Trulia Price Monitor.

The home-price slowdown has tempered gains in “hyper-rebounding markets,” like Las Vegas, Sacramento and Oakland, California, Trulia noted. Such markets suffered more during the housing meltdown and typically have high rates of negative equity as a result.

May marked the first month since July 2012 that no major housing market saw annual price gains of more than 20 percent, Trulia said. A year ago, Trulia tracked gains of that magnitude in seven of the 100 largest metros.

trulia home prices

Source: Trulia

That’s a good thing, writes Trulia Chief Economist Jed Kolko, noting that dizzying price gains “encourage flipping and speculation, fuel unrealistic expectations, and add to the risk of future bubbles.”

“Now, with fewer markets going to either extreme than at any time during the recovery, price gains are finally looking more balanced and sustainable,” Kolko said.

But it also means fewer homeowners will move out of negative equity over the next year. CoreLogic projects that home prices will rise by 5 percent over the next 12 months, lifting 1.2 million properties “out of the negative equity trap,” said CoreLogic CEO Anand Nallathambi in a statement.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×