Over three-quarters of a million homeowners emerged from being underwater on their mortgages during the first quarter of 2013 and 39 million households now have positive equity in their homes.  However, millions of those homeowners are only narrowly in that position.

CoreLogic, a leader in consumer financial and property reporting, said Wednesday that 850,000 more homes returned to a state of positive equity between January and March.

What Does “Underwater” Mean?

Negative equity, often referred to as “underwater” or “upside down,” means that borrowers owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in value, an increase in mortgage debt or a combination of both.

Less Underwater Homes

At the end of the quarter, 9.7 million households or 19.8 percent of all properties with a mortgage remained underwater compared to 10.5 million homes or 21.7 percent of mortgaged properties at the end of the fourth quarter of 2012.   The aggregate value of underwater property decreased more than $50 billion to $580 billion quarter-to-quarter.  CoreLogic said this decrease was largely driven by rising home prices.

But many of the homes in positive territory remain on shaky ground.  Of those 39 million properties, 11.2 million have less than 20 percent equity, and may have a more difficult time refinancing.  Another 2.1 million had less than 5 percent equity, referred to as near-negative equity.

Underwater Home Statistics

These properties are at risk of returning to negative status should home prices fall.  Under-equity mortgages account for 23 percent of mortgaged properties.  The average amount of equity for all properties with a mortgage is 32.8 percent.

The highest percentage of negative equity properties were in Nevada at 45.4 percent.  Florida was second at 38.1 percent followed by Michigan (32 percent), Arizona (31.3 percent) and Georgia (30.5 percent.)  These top five states combined account for 32.8 percent of negative equity in the U.S.