There was a lot of talk last week about how negative equity, now at 22.5 percent of all homes with mortgages, according to CoreLogic

CLGX loading...

Quote  |  Chart  |  News  |  Profile

[CLGX  Loading...      ()   ], will affect the housing recovery. Then mortgage rates popped up to 5 percent overnight, thanks to the 10-year Treasury, and more folks voiced concern over today's potential home buyer and his or her ability to take advantage of this low-priced housing market.

Tooga | Stone | Getty Images

Owing more on your mortgage than your home is currently worth doesn't necessarily mean you can't afford your monthly mortgage payment or that you're going to go about your day any differently, other than feeling a little financially depressed. While it may make some more likely to walk away or "strategically default," most won't.

It does mean that you can't use your home to pay for anything, like a new car or your kids' college tuition, and it does mean that you can't move up to a nicer home without having to take a hit by paying off your mortgage with whatever stash of cash you have. Now here's the issue: The move-up buyer (which is the market we're counting on now to get us out of this mess, given that the home buyer tax credit pulled a lot of first-time buyer demand forward to the beginning of 2010). A significant number of move-up buyers, even if not underwater on their mortgages now, may be in a negative equity position when it comes to buying a new home.

Let me just preface that if you happen to be wealthy independent of your home, or a relative just died and left you a sizeable chunk of cash, this doesn't apply to you. Now here goes. Mortgage expert Mark Hanson makes an excellent point and did some math, which I want to share:

"In order to sell and re-buy, a homeowner must receive enough proceeds from the sale to 1) pay off the mortgage(s), 2) pay a Realtor 5-6 percent and 3) put a 3.5-20 percent down payment on a new vintage loan," begins Hanson, and those alone may be too financially off-putting in today's economy for many potential buyers.

"Effective negative-equity is the big weight on housing that has no easy or quick cure," continues Hanson.

His math:

• Real effective negative-equity as it pertains to house selling and buying starts at:
• <9.5% positive equity for FHA repeat buyers (6% Realtor fee + 3.5% down payment)
• <16% positive equity for Fannie/Freddie repeat buyers (6% Realtor fee + 10% down payment)
• <26% for Jumbo repeat buyers (6% Realtor fee + 20% down payment)

When lowering Corelogic's negative equity threshold to 75% on CA mortgages, 53% are effectively underwater.

And I would add to Hanson's logic, that CoreLogic also noted that an additional 2.4 million borrowers are in a "near-negative equity" position, with less than 5 percent equity in their homes. That puts them out of the move-up market as well.

With rising mortgage rates, even if they don't go much higher, the "effective" negative equity rate of the move-up buyer will impact recovery, slowing sales as more buyers/demand are priced out of the market.

Questions?  Comments?  And follow me on Twitter @Diana_Olick