Slumping house prices at the end of 2010 led to a surge in St. Louis-area homeowners who owe more than their house is worth, according to a new report out today.

In the fourth quarter of 2010, more than one in three St. Louis-area homes with a mortgage were worth less than what is owed on them, according to real estate data firm Zillow. That's up from 22 percent in the third quarter.

The spike in so-called "negative equity" was driven by a 6.1 percent decline in home values from the third quarter, according to Zillow, as well as by a slowdown in foreclosures at the end of the year - which kept more underwater mortgages in the hands of borrowers instead of their bank. In the fourth quarter, using its Home Value Index, Zillow calculated the average home here worth $130,400.

Nationwide, 27 percent of mortgages are underwater, according to Zillow. But some markets have it far worse. In Orlando, 62 percent of homes are worth less than what's owed on them. And in Phoenix the number is nearly 70 percent.

Many economists say the housing market won't improve until the glut of underwater mortgages is cleared, as they continue to drive foreclosures and pump excess supply into the market.

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