U.S. home prices rose about 6% in 2014, helping to lift more homeowners out of a negative equity position on their mortgages. The bad news is that negative equity — in which a homeowner owes more on the mortgage than the market value of the property — is rising in 21 of the country’s 50 largest housing markets.

There are 8.65 million U.S. homes with negative equity (also called “underwater”), down from a peak of over 16 million at worst of the housing crisis. Of U.S. homes with a mortgage, 16.9% were underwater at the end of last year. The total percentage of U.S. homeowners who are underwater or who have less than 20% equity in their homes — the so-called effective negative equity rate — is now 35.5%. The data come from Zillow’s fourth-quarter 2014 report on negative equity.

Hardest hit are low-priced homes. According to Zillow’s chief economist:

Higher negative equity rates have become the new normal. We’ve long been expecting the negative equity rate to fall more slowly as home value growth also slows, and unfortunately that’s exactly what we’re seeing. Compounding the problem is the fact that negative equity is decidedly not an equal opportunity predator, and looms larger over the bottom 10 percent of homes, where homeowners are least prepared to withstand the assault.

The five U.S. metropolitan areas with the highest negative equity rates at the end of December are:

• Las Vegas: 26.4%
• Atlanta: 26.1%
• Chicago: 25.1%
• St. Louis: 22.8%
• Cleveland: 21.4%

The five metro areas with the highest percentage of underwater low-end homes are:

• Detroit: 50.2%
• Atlanta: 49%
• Kansas City: 42.8%
• Cleveland: 42.6%
• St. Louis: 41.9%

Zillow expects the percentage of underwater homes to fall to 15.4% by the end of 2015.

ALSO READ: 4 States Account for Nearly a Third of Underwater Mortgages

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