Rising prices helped lift 1.7 million homes above water in 2012, including 200,000 in the final three months of the year, according to a report released today by real estate data and technology firm CoreLogic.

An estimated 10.4 million homes remained underwater as of Dec. 31 — about one in five (21.5 percent) of all homes with mortgages. But another 5 percent gain in home prices could lift 1.8 million additional homes into a state of positive equity, CoreLogic said. 

In aggregate, total negative equity nationwide fell $42 billion last quarter to $628 billion, with just over half that amount consisting of first liens with home equity loans. The average amount of equity for all properties with a mortgage was 31 percent.

But 2.3 million homes with "near-negative equity" (less than 5 percent) are particularly at risk should home prices decline, CoreLogic said.

"The scourge of negative equity continues to recede across the country," a trend that should continue in 2013, said Anand Nallathambi, president and CEO of CoreLogic, in a statement. "There is certainly more to do but with fewer borrowers underwater, the fundamentals underpinning the housing market will continue to strengthen."

CoreLogic has previously said negative equity was holding back potential home sellers. Underwater borrowers — who owe more on their mortgages than their homes are worth — must obtain approval from their lender for a short sale, or come up with the difference between the home’s sales price and the mortgage value.

For-sale home inventory stood at its lowest since January 2001 at the end of the fourth quarter. Inventory shortages are at least partly responsible for home price increases nationwide.

Improving market conditions "are the catalyst for households to regain equity and become participants in 2013’s housing market," said CoreLogic Chief Economist Mark Fleming in a statement.

While 38.1 million mortgage residential properties had equity at the end of the fourth quarter, CoreLogic noted that three out of 10 properties with equity had less than 20 percent equity. These "under-equitied" borrowers could have a more difficult time obtaining new financing for their homes due to tight underwriting standards, the firm said.

Five states accounted for nearly a third of negative equity in the U.S.: Nevada, where 52.4 percent of mortgaged properties are underwater; Florida (40.2 percent), Arizona (34.9 percent), Georgia (33.8 percent) and Michigan (31.9 percent).

Source: CoreLogic 

Of the 25 largest metro areas, Tampa-St. Petersburg-Clearwater, Fla., had the highest share of mortgaged properties in negative equity at 44.1 percent, followed by Miami-Miami Beach-Kendall, Fla. (40.7 percent), Atlanta-Sandy Springs-Marietta, Ga. (38.1 percent), Phoenix-Mesa-Glendale, Ariz. (36.6 percent), and Riverside-San Bernardino-Ontario, Calif. (35.7 percent), CoreLogic said.

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