In some positive news regarding the housing market, the U.S. Home Equity & Underwater Report published today by RealtyTrac indicates that "seriously underwater" properties are on a decline from peak levels in 2012. Defined as situations where the combined loan amount secured by the property is at least 25 percent higher than the property's estimated market value, U.S. residential properties seriously underwater in the fourth quarter of 2014 were at their lowest level since RealtyTrac started to keep record of home equity trends in Q1 of 2012. Want more articles like this? Create an account today to get BiggerPocket's best blog articles delivered to your inbox Sign up for free The end of 2014 saw 7,052,570 properties — or about 13 percent of all properties with a mortgage — seriously underwater, down from a peak of 12.8 million properties in the second quarter of 2012. “Median home prices nationwide bottomed out in March 2012 and since then have increased 35 percent, lifting 5.8 million homeowners out of seriously underwater territory,” commented RealtyTrac VP Daren Blomquist. Source: RealtyTrac Related: Do Interest Rates Drive the Housing Market? (Maybe Not As Much As You Think…) Notable U.S. housing markets where shares of seriously underwater properties dropped below the 10 percent level include: San Jose, CA (2 percent) Denver, CO (4 percent) Portland, OR (5 percent) Minneapolis, MN (5 percent) Boston, MA (5 percent) San Francisco, CA (5 percent) Lost Angeles, CA (6 percent) Pittsburgh, PA (6 percent) Houston, TX (8 percent) Dallas, TX (8 percent) Seattle, WA (9 percent) A Rise in Positive Equity The fourth quarter of 2014 also marked another major milestone: Distressed properties — defined as homes in some state of foreclosure — with positive equity outnumbered the share of properties seriously underwater. Whereas only 31 percent of homes a year ago had positive equity (and 48 percent were seriously underwater), 42 percent boasted positive equity by the end of 2014 (and 35 percent were seriously underwater). Source: RealtyTrac U.S. markets with the highest percentage of distressed properties with positive equity include: Pittsburgh, PA (81 percent) Oklahoma City, OK (76 percent) Austin, TC (73 percent) Nashville, TN (70 percent) San Antonio, TX (63 percent) San Francisco, CA (62 percent) Raleigh, NC (61 percent) Overall, 20 percent of all properties with a mortgage — or around 11,249,646 U.S. homes — were equity rich by the end of 2014, with at least 50 percent positive equity. Markets Still Struggling With Underwater Properties Still, some markets continued to struggle with seriously underwater properties. Areas with the highest percentages of seriously underwater properties include: Las Vegas, NV (30 percent) Orlando, FL (26 percent) Tampa, FL (25 percent) Jacksonville, FL (24 percent) Cleveland, OH (24 percent) Detroit, MI (24 percent) Chicago, IL (22 percent) Atlanta, GA (19 percent) What Does This Mean for the Housing Market in 2015? Experts expect to see continued recovery of U.S. markets through the year — however, growth may remain more sustainable and more in line with wage increases. Related: How To Measure Real Estate Appreciation In Your Housing Market Said Blomquist, “While the remaining seriously underwater properties continue to be a millstone around the neck of some local markets, the growing number of equity rich homeowners should help counteract the downward pull of negative equity in many markets, empowering those housing markets — and by extension their local economies — to walk on water in 2015.” Investors: What Do You Think? Are you seeing an increase in equity rich properties in your area? How do you think these trends will affect home buying? How do you think 2015 will go down in the real estate investing books? Let’s discuss in the comments section below!