Over the course of last year, nearly 2 million homeowners were released from negative equity, Zillow reported Thursday.
Data from Zillow revealed 1.9 million homeowners came out of negative equity due to two main reasons: sustained high foreclosure rates and rising home values, which increased by 5.9 percent year-over-year, according to the Zillow Home Value Index.
Zillow further projects at least 999,601 homeowners will be released from negative equity in 2013.
""As home values continue to rise and more homeowners are pulled out of negative equity in 2013, the positive effects on the housing market will be numerous,"" said Dr. Stan Humphries, Zillow's chief economist.
Humphries explained, ""homeowners will have more flexibility, and some will likely choose to list their home for sale, helping to ease inventory constraints and moderating sometimes dramatic, demand-driven price increases in some markets.""
Zillow also estimated 13.8 million mortgages were still underwater at the end of the Q4, down from 15.7 million in the same quarter in 2011. The most recent figure represents 27.5 percent of homeowners with a mortgage, down from 31.1 percent a year ago. Zillow's report uses data from TransUnion and looks at current outstanding loan amounts for owner-occupied homes and compares them to the current value of the homes.
In dollar terms, homeowners were collectively underwater by more than $1 trillion at the end of 2012.
Out of the 30 largest metros, the areas with the highest number of homeowners freed from negative equity in 2012 were Phoenix, where 135,099 homeowners were released, followed by Los Angeles (72,936); Miami-Fort Lauderdale (70,484); Dallas-Fort Worth (59,461); and Riverside, California (58,417).
This year, Zillow expects the most freed homeowners to come out of Los Angeles, Riverside, Phoenix, Sacramento, and Dallas-Fort Worth.
While progress is being made on a national and local level, Humphries noted ""negative equity is still very high,"" and pointed out ""millions of homeowners have a very long way to go to get back above water, even with current robust levels of home value appreciation in most areas.""