Some 5 million of these "underwater" homes have mortgages that are at least 20 percent higher than the value of the home, according to First American CoreLogic, a real-estate information company based in Santa Ana, Calif.
Another 2.3 million mortgages are approaching negative equity, which could imperil any housing recovery. Sales of existing homes rose a better-than-expected 10 percent in October, data showed Monday, as buyers raced to take advantage of an expiring tax credit that was ultimately extended.
"Negative equity continues to be pervasive and to impact almost every segment of the housing market," Mark Fleming, chief economist at First American CoreLogic, said in a statement. "It will take a significant rebound in home prices, which we are not expecting, to offset the dampening effects of negative equity in the most depressed states."
Higher home prices were not forthcoming in additional nationwide data released Tuesday by the Federal Housing Finance Agency, but prices did decline by the smallest percentage in over a year. U.S. home prices fell 3.8 percent in the third quarter compared with last year, the smallest drop since the first quarter of 2008, according to the agency's data, which is based on purchase prices.
"Any recovery in housing won't be on firm ground until the job market comes back," Patrick Newport, an economist at IHS Global Insight in Lexington, Mass., told Bloomberg News.
In other housing data released Tuesday, the Standard & Poor's Case-Schiller Home Price Index, a closely watched measure of the housing market, showed that home prices in the 20 U.S. cities it measures rose for the fourth straight month in September.
Nineteen of the 20 cities in the S&P/Case-Shiller index showed a smaller year-over-year decline in home prices than in August. Nine of the 20 areas showed an increase, with the biggest month-to- month gains in Detroit and Minneapolis.
---- Compiled from wire reports and other media sources