The number of properties with negative equity fell for the second straight quarter, according to a report from CoreLogic.
However, a staggering 11 million, or 23 percent of all residential properties with mortgages nationwide, were still in a negative equity position as of the end of the second quarter.
That’s down from 11.2 million properties, or 24 percent, from the first quarter of 2010.
Here’s the super big catch – the reduction in negative equity was a result of foreclosures, not meaningful home price appreciation.
And an additional 2.4 million borrowers had less than five percent home equity, meaning they probably couldn’t sell their homes without taking a loss either.
Altogether, negative equity and near-negative equity mortgages accounted for nearly 28 percent of all residential properties with a mortgage nationwide.
Negative equity is also referred to as “underwater” or “upside down,” and refers to borrowers who owe more on their mortgages than their homes are currently worth.
Five states continue to account for much of the negative equity in the country, including Nevada, where 68 percent of all properties are underwater, followed by Arizona (50%), Florida (46%), Michigan (38%), and California (33%).
“Negative equity continues to both drive foreclosures and impede the housing market recovery. With nearly 5 million borrowers currently in severe negative equity, defaults will remain at a high level for an extended period of time,” said Mark Fleming, CoreLogic chief economist, in a statement.
Read more: Can I refinance with negative equity?