The number of U.S. homes considered to have serious negative equity dropped in December 2013, according to the latest U.S. Home Equity & Underwater Report from RealtyTrac.
A total of 9.3 million homes were "deeply underwater" -- homes worth at least 25 percent less than the combined loans for the property -- representing 19 percent of all homes with a mortgage in December.
The figure dropped from the 10.7 million homes deeply underwater in September 2013, and was lower than the 10.9 million properties in January 2013. The December number is also down from the peak of 12.8 million in May 2012.
In December, a total of 239,470 homes in the foreclosure process were considered deeply underwater, representing 48 percent of all properties. That was 60,000 fewer than three months prior.
The report also highlighted the percentage of homes in the foreclosure process with positive equity in December. The number increased to 31 percent, from 24 percent last September.
"During the housing downturn we saw a downward spiral of falling home prices resulting in rising negative equity, which in turn put millions of homeowners at higher risk for foreclosure when they encountered a trigger event such as job loss," Daren Blomquist, vice president at RealtyTrac, said in the report. "Now we are seeing the reverse trend: rising home prices resulting in falling negative equity, which in turn is giving millions of homeowners a lifeline to avoid foreclosure when they encounter a trigger event."
The percentage of equity-rich homeowners -- with at least 50 percent equity -- increased from 16 percent to 18 percent in December. The figure is getting closer to a tipping point that should result in a larger inventory of homes listed for sale, according to RealtyTrac.
However, millions of homeowners still face the battle of deep negative equity, and it could take years before they come out of the hole, the report states.
"The longer these homeowners remain in a negative equity position without relief in the form of a principal loan balance reduction, the more likely that foreclosure will become the path of least resistance for them," Mr. Blomquist said.
More from the report:
States with the highest percentage of residential properties deeply underwater in December were Nevada (38 percent), Florida (34 percent), Illinois (32 percent), Michigan (31 percent), Missouri (28 percent), and Ohio (28 percent).
Major metropolitan statistical areas with the highest percentage of residential properties deeply underwater in December were Las Vegas (41 percent), Orlando, Fla., (36 percent), Detroit (35 percent), Tampa, Fla., (35 percent), Miami (33 percent), and Chicago (33 percent).
States with the highest percentage of equity-rich residential properties were Hawaii (36 percent), New York (33 percent), California (26 percent), Montana (24 percent), and Maine (24 percent). The District of Columbia also posted an equity-rich rate of 24 percent.
Major metropolitan statistical areas with the highest percentage of equity-rich residential properties were San Jose, Calif., (37 percent), San Francisco (33 percent), Pittsburgh (30 percent), Buffalo, N.Y. (30 percent), and Los Angeles (29 percent).
States with the highest percentage of deeply underwater residential properties in the foreclosure process included Nevada (65 percent), Florida (61 percent), Illinois (61 percent), Michigan (55 percent), and Ohio (48 percent).
Major metro areas with the highest percentage of deeply underwater residential properties in the foreclosure process were Las Vegas (66 percent), Tampa, Fla. (63 percent), Chicago (62 percent), Orlando (61 percent), and Detroit (61 percent).
States with the highest percentage of foreclosure properties with some equity included Oklahoma (62 percent), Colorado (54 percent), New York (52 percent), Texas (51 percent) and North Carolina (45 percent).
Major metro areas with the highest percentage of foreclosure properties with some equity were Buffalo, N.Y. (74 percent), Pittsburgh (73 percent), Austin (67 percent), Denver (64 percent), and Oklahoma City (63 percent).