In the third quarter of this year, negative equity slipped further and now represents less than 30 percent of homeowners with a mortgage, Zillow revealed Thursday.

According to a negative equity report, 28.2 percent of all homeowners with a mortgage remain underwater, a decrease from 30.9 percent in the second quarter.

The 28.2 percent translates into about 14 million U.S. homeowners who owe more on their mortgage than their home’s value. In the second quarter, about 15.3 million homeowners were underwater.

While the numbers may be diminishing, they still have broad implications.

“[A] substantial number of homes are still locked up in negative equity, unable to enter the existing re-sale market despite the desires of their owner,” Zillow chief economist Dr. Stan Humphries said in a release.

Zillow attributed the decline in negative equity to rising home values, which increased 1.3 percent from the second quarter to the third, according to data from the company.

Even though home prices are offering some relief to the problem of negative equity, Zillow warned challenges still lie ahead.

“The housing market has found real momentum of its own, but is not immune from shocks to the broader economy. If negotiations centered on resolving the fiscal cliff don’t inspire confidence in investors and consumers alike, recent home value gains – and, as a result, falling negative equity rates – could stall,” Humphries added.

The real estate data provider also found the 30 largest U.S. metros saw quarterly declines in negative equity.

Among the metros, Phoenix experienced the biggest quarterly decline in negative equity. The metro went from having 51.6 percent of homeowners in negative equity in Q2 to 45.5 percent in Q3, a decline of 6.2 percentage points. In Las Vegas, negative equity dropped 5.5 percentage points to 63 percent quarter-over-quarter. Denver had the third biggest quarterly declined, where negative equity fell 4.9 percentage points to 22.2 percent.

In Pittsburgh, only 14.3 percent of homeowner are in negative equity.

 by Esher Cho