Rising home prices last year helped more homeowners get back above water on their mortgages in the fourth quarter, a fresh sign of improvement in the housing market, data from CoreLogic showed on Tuesday.
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There were 10.4 million homeowners who owed more on their mortgages than their homes were worth in the final quarter of 2012, down from 10.6 million in the third quarter, said CoreLogic .
That accounted for 21.5% of all mortgages, down from 22%. In 2012, 1.7 million properties returned to positive equity.
The housing market started to recover last year as prices rose, foreclosures eased and inventories tightened. Economists expect the sector to continue to gain traction in 2013.
"The scourge of negative equity continues to recede across the country," Anand Nallathambi, chief executive of CoreLogic, said in a statement.
"There is certainly more to do, but with fewer borrowers underwater the fundamentals underpinning the housing market will continue to strengthen."
Of the 38.1 million homes that were above water, 11.3 million had less than 20% equity. Considered to be "under-equitied," such borrowers can face difficulty getting new financing for their homes.
Another 2.3 million homes were near negative equity with less than 5% equity, making them vulnerable to a renewed downturn in home prices.
The average amount of equity for all properties was 31%.
Nevada had the highest rate of homes underwater at 52.4% of homes. Florida came in second at 40.2%, followed by Arizona, Georgia and Michigan. Those top five states accounted for 32.7% of negative equity in the country.