A report by CoreLogic shows that 22.1 percent of all residential properties with a mortgage were in a negative equity position at the end of the third quarter.  This is down slightly from 22.5 percent in the second quarter. An additional 2.4 million borrowers had less than 5 percent equity, referred to as near-negative equity, in the third quarter. Together, negative equity and near-negative equity mortgages accounted for 27.1 percent of all residential properties with a mortgage nationwide in the third quarter, down from 27.5 in the previous quarter.

“Although slightly down, negative equity remains very high and renders many borrowers vulnerable when negative economic shocks occur, such as job loss or illness. The nearly $700 billion mortgage debt overhang has touched many corners of the market, and this overhang is holding back the recovery of the housing market and broader economy,” said Mark Fleming, chief economist with CoreLogic.

Nevada has the highest negative equity percentage with 58 percent of all of its mortgaged properties underwater, followed by Arizona, 47 percent; Florida, 44 percent; Michigan, 35 percent; and Georgia, 30 percent. This is the first quarter that Georgia entered the top five, surpassing California which had been in the top five since tracking began in 2009.

The top five states combined have an average negative equity ratio of 41.4 percent, while the remaining states have a combined average negative equity ratio of 17.6 percent.

More info