Aug. 15--Despite St. Louis' relatively affordable cost of housing, borrowers here are just about as likely as the nation as a whole to owe more on their house than it's worth.

Those are the findings of a new report out this week from First American Core Logic, which tracks real estate and foreclosure data. In the second quarter of the year, it found, 29.5 percent of St. Louis mortgages were "underwater" -- that is, borrowers owed more on their mortgage than their house is worth. That's 170,871 homes. An additional 38,000, or roughly 6.5 percent, are "near negative equity" -- within 5 percent of being underwater.

Nationwide, the underwater figure sits at 32.2 percent, and another 6 percent are nearly there.

This is a serious problem for the housing market, and broader economy, said Mark Fleming, First American CoreLogic's chief economist, because such negative equity situations are a major factor in the stubbornly high rate of foreclosure.

"Negative equity continues to be the dominant driver of the mortgage market because it leads to foreclosures in the event a borrower experiences some kind of economic shock: job loss, illness or other adverse situation," he said. "Until negative equity recedes and unemployment declines, mortgage risk will continue to be very elevated."

The good news is that, at least for now, it doesn't appear to be getting much worse. The decline in home prices has been leveling off, meaning that mortgages that aren't underwater now are less likely to get that way. The percentage of borrowers with negative equity nationwide actually dropped a bit, from 32.5 percent in the first quarter to 32.2 percent. Comparable figures weren't available for St. Louis, because the company changed the way it counts here.

The problem is much more severe in some places than others. In Nevada, for instance, First American believes two in every three borrowers is underwater, and roughly half in Arizona, Florida and Michigan. That's compared with about one in eight in Montana and New York.

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