The number of underwater mortgages in the U.S. increased again in the third quarter. That makes sense because by most measures home values have fallen throughout the period. It also confirms that widely held belief that housing prices may not return to 2006 levels for many years.

Research firm Zillow reports that:

A lower rate of foreclosure liquidations coupled with relatively flat home values caused negative equity to rise in the third quarter with 28.6 percent of single-family homeowners with mortgages underwater, compared to 26.8 percent in the second quarter.

Most of the cities with the highest level of mortgages that are underwater are on many lists of regions troubled by the housing disaster.

In the Miami area, 47% of the mortgages are underwater. The figure is 66% for Phoenix. Sacramento underwater mortgage level is 51%.

Home markets that are at the better end of the scale include Boston, where only 14% are underwater, and New York the number is 18%.

The Zillow data is another sign that the housing problem is local and not national. Until the home markets in areas that include south Florida, central California, Arizona and Nevada recover, the underwater mortgage figure for the entire country will remain near historic highs.

Market-by-market numbers here.

Douglas A. McIntyre

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