California's housing recession is showing some improvement: a decline in the number of borrowers who owe more on their homes than the homes are worth. But the numbers remain high.

Falling home prices in California, combined with a greater incidence of high loan-to-value ratios, led to a surge in such situations, called negative equity, in 1993.

Negative equity has been the California housing market to stall, particularly in Southern California, according to a study by TRW Redi Property Data, a real estate information company in Riverside, Calif.

"The negative equity phenomenon goes some way in explaining the current anemic state of California's housing market," said Nima Nattagh, a market analyst at TRW. "It is holding back the move-up market, as well as creating uncertainty about the future investment value of homeownership."

Negative equity locks homeowners in because they usually cannot afford to take a loss when selling their houses, either to relocate or to trade up. They also cannot qualify for a refinancing.

Mr. Nattagh said negative equity was a bigger problem in Southern California than in northern areas.

"Certain markets, like Riverside and San Bernardino, in Southern California, are affordable markets, with a high incidence of low down payments and a sharp decline in prices since 1990," resulting in a high number of negative-equity homeowners.

Home values have declined 20% in Los Angeles and Southern California metropolitan areas since 1990. In Southern California, 5.2% of all homeowners had negative equity in the first quarter of 1995.

Northern California, including the San Francisco Bay area, has seen a 13% decline in home values since 1990. In Northern metro areas, only 2.6% of homeowners have negative equity.

The ratio of negative equity mortgages of all mortgages in California was 13% in the first quarter of 1995.

The problem is most acute in those regions of the state where mortgage lenders continue to provide low-down-payment mortgages despite deteriorating home values, the TRW report said.

The drop in home prices slowed significantly this year in California, Mr. Nattagh said, from the high levels in the middle of the housing recession in 1993 and 1994.

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