A recent report from CoreLogic showed that the percentage of residential mortgages with negative equity declined in the third quarter, which may be a positive sign for the housing market.
In total, 10.7 million residential properties were considered to be in a negative equity position during the third quarter, according to the report. This consisted of 22.1 percent of all properties. The figure is slightly lower than the second quarter's reading of 10.9 million, or 22.5 percent of homes.
"Although slightly down, negative equity remains very high and renders many borrowers vulnerable when negative economic shocks occur, such as job loss or illness," said Mark Fleming, chief economist with CoreLogic. "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."
Another 2.4 million mortgage owners were discovered to have less than 5 percent equity during the quarter, which may show residential mortgages that are at a higher risk than others to slip underwater in the future.
However, when taken together, the improvements may be positive for lenders. This, coupled with recent information that consumer confidence is up, could spur increased mortgage activity.