The number of homes worth less than their outstanding mortgage jumped in the fourth quarter as prices fell and lenders seized fewer properties from delinquent borrowers, according to Zillow Inc.

About 15.7 million homeowners had negative equity, also known as being underwater, at the end of the year, up from 13.9 million in the previous three months, the Seattle real estate information company said in a report Wednesday. The total represented 27% of mortgaged single-family homes, the highest in Zillow data dating to the first quarter of 2009.

Values will fall as much as 5% this year, putting more homeowners underwater, before finding a floor as the economy improves, Stan Humphries, Zillow's chief economist. said

"These seem like fairly grim numbers," Humphries said in a telephone interview. "We're still expecting a bottom in home values later this year. And this, if anything, makes me a bit more confident because I'm seeing very large corrections now, which means the market can start to repair itself."

The median value for a single-family home was $175,200 in the fourth quarter, down 2.6% from the end of September and 5.9% from a year earlier, according to Zillow.

Values have fallen 27% from the June 2006 peak.

Las Vegas led the nation in homes with negative equity, at about 81.5% of all properties with mortgages, Zillow said.

It was followed by 69.9% in Phoenix; 67.9% in Reno, Nev.; 61.7% in Orlando, Fla.; and 58.5% in Modesto, Calif.

The median home value in Las Vegas was $125,156 in December, the lowest since February 2000 and down 59% from the 2006 peak, Zillow said.

Atlanta had the fastest increase in negative equity, with the percentage of underwater homes rising to 54% from 37.6% the previous quarter.

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