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PHOENIX - With prices surging, the percentage of Arizona homes that are underwater has fallen dramatically since last year.

Homes with mortgages worth more than their values fell to 24.7 percent in the second quarter of 2013 from 39.7 percent in the same quarter of 2012, according to the Equity Report from CoreLogic, a financial information company.

The Phoenix metro area saw a decline from 41.9 percent to 25.6 percent, though it still had the third-highest percentage of homes underwater, trailing only Miami and Tampa, among the 25 largest metropolitan areas, according to CoreLogic.

Cami Elliott, president of the Phoenix Association of Realtors, said she's represented several sellers within the past year with homes that were $50,000 to $100,000 underwater 18 months ago. Now those sellers either broke even or made a profit, she said.

"So they are taking advantage of getting out of those properties," Elliott said.

Sue Flucke, president of the Arizona Association of Realtors, pointed to a 25 to 30 percent increase in home prices over the past year that has exceeded expectations.

This year's expected increase is 10 to 12 percent, she said.

Flucke said it will take a few years for the market to hit a normal growth rate of 5 to 7 percent annually. However, she said, the market needs large increases to recover from the housing crash.

"Right now, we need to make up what we lost," Flucke said.

Underwater homes in Tucson fell to 29.3 percent in September 2013 from 38.3 percent in September 2012, according to RealtyTrac, a real estate information company. It defined underwater homes as those with loans worth at least 25 percent more than the properties' values.

George Hammond, associate director at the Economic and Business Research Center at the University of Arizona's Eller College of Business, said the decrease in underwater homes reflects an overall recovery in the Tucson area.

"That's definitely a good sign," he said.

Hammond said some of the decrease could be the result of foreclosures and short sales, adding that it could also be from people sticking out the bust.

In Flagstaff, however, the percentage of underwater homes increased to 18.8 percent from 16.6 percent a year before, according to RealtyTrac's September research.

Jacquie Kellogg, president-elect of the Northern Arizona Association of Realtors, said that Flagstaff area didn't fall as far as other markets in the state, so it isn't seeing the same recovery.

"We are nowhere near the appreciation in Phoenix, she said.

Michael Orr, director of the Real Estate Center at Arizona State University's W.P. Carey School of Business, said the housing recovery will run out of steam without job creation.

"It would be doing better if we got more high-paying jobs into the state," he said.

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