The number of homeowners underwater on their mortgage continues to shrink as the amount of tappable home equity grows, according to Black Knight Financial Services.

There are now just 2.2 million homeowners left in negative equity positions, a full one million fewer than at the start of 2016. 

“The negative equity situation has improved substantially since the height of the great recession,” Ben Graboske, vice president, data and analytics, said in a press release.

"Whereas negative home equity was once a widespread national problem – with roughly 30% of all homeowners being underwater on their mortgages at the end of 2010 – it has now become much more of a localized issue. By and large, the majority of states have negative equity rates below the national average of 4.4%."

There are, though, some pockets where homeowners continue to struggle. Three states in particular stand out: Nevada, Missouri and New Jersey, all of which have negative equity rates more than twice the national average. Atlantic City leads the nation, with 23% of its borrowers underwater, followed by St. Louis at 20%.

"We also see that lower-priced homes – those in the bottom 20% of prices in their communities – are nine times more likely to be underwater than those in the top 20%," Graboske said. 

“On the other hand, we’ve also seen a steady increase in the number of borrowers with tappable equity in their homes, meaning they have current combined loan-to-value (CLTV) ratios of less than 80 percent. There are now some 39 million such borrowers, with a total of $4.6 trillion in available, lendable equity. That works out to an average of about $118,000 per borrower, making for the highest market total and highest average per borrower we’ve seen since 2006."

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