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Home prices are still rising, and the economy is improving, but the ills of the housing crash are far from cured: 7.4 million borrowers were still "seriously" underwater on their mortgages at the end of June, according to RealtyTrac.
The real estate information company defines that as the loan amount being at least 25 percent higher than the property's estimated market value.
Over 13 percent of all properties with a mortgage are in this predicament, and that is actually a slight increase from the first quarter of this year.
How can this be when home prices are still rising? It depends on how you read those prices. The National Association of Realtors reported that the median price of a home sold in June reached its highest level in history. The median, however, means half the homes sold for more and half sold for less, so if higher-priced homes are selling more, which they are, that skews the median higher. S&P/Case Shiller, which measures repeat sales of similarly priced homes, shows price gains have been shrinking in general but are still higher than a year ago.
Still, another report from Weiss Residential Research digs deeper in local areas and finds that nearly half the homes in the nation's top markets are actually losing value.
"Don't be fooled by averages," said Allan Weiss, founder and CEO of Weiss Residential Research. "All of the largest metro indexes are rising more slowly than they were a year ago though market reports give the impression that values are rising across the board. However, people don't own the entire market, they own one house."
Larger, more expensive homes, are sitting on the market longer and seeing more price cuts than smaller homes with two bedrooms or less, according to Weiss. That is likely because there is so much less supply on the lower end of the market than on the high end.
Home prices are most often measured in terms of sale price, but RealtyTrac's numbers are based on estimates of home all home values, not just the ones for sale.
"Certainly the trends in values and prices should be similar, but with the values, we're dealing with a much broader set of data than the home prices, which will tend to skew toward the homeowners who have regained more equity," said Daren Blomquist, vice president of RealtyTrac. "Those homeowners with more equity are more likely to be the ones who decide to sell in this market to take advantage of that equity, whereas homeowners who are struggling to regain their equity are less likely to list."
The number of underwater borrowers has now increased for two straight quarters but it is still lower than a year ago, when over 17 percent of borrowers were seriously underwater. The number of underwater borrowers in the foreclosure process, however, is falling steadily, as banks ramp up the repossession process, and those borrowers become renters.