Supported by increasing home prices, the U.S. housing market saw negative equity narrow at the end of 2012, according to a Tuesday report from analysis firm CoreLogic . The value of negative equity, which measures when a borrower owes more on a mortgage than a home is worth, narrowed $42 billion to reach $628 billion at the end of the fourth quarter from $670 billion at the end of the third quarter. About 21.5% of all homes with a mortgage had negative equity at the end of the fourth quarter, down slightly from 22% at the end of the third quarter. Looking at the states, just five accounted for almost one-third of total U.S. negative equity: Nevada, Florida, Arizona, Georgia and Michigan. In all of these states more than 30% of mortgaged properties had negative equity. About 1.7 million properties rebounded to positive from negative equity last year. Despite a strengthening housing market, almost one-third of the 38.1 million residential properties with positive equity have less than 20% equity, a level under which borrowers face tougher underwriting standards and may have trouble with new financing. "There is certainly more to do but with fewer borrowers underwater, the fundamentals underpinning the housing market will continue to strengthen," said Anand Nallathambi, CoreLogic's chief executive. "The trend toward more homeowners moving back into positive equity territory should continue in 2013."
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