Almost a quarter of U.S. homeowners with a mortgage are still underwater after the rapid plunge of house prices that started in 2007, however more and more of those homeowners are seeing their equity return RealtyTrac said today.   Home prices, which finally began to rise early last year, have pulled an estimated 600,000 properties from the category of "deeply underwater" just since May.

At that time about 26 percent of mortgaged homes had a loan to value (LTV) ratio of 125 percent or more; that is about 11.3 million homes were deeply underwater.  RealtyTrac estimates that number at 10.7 million now, 23 percent.  In September 2012 there were an estimated 12.5 million such homeowners, 28 percent of those with a mortgage.

The company says another 8.3 million homeowners have what it calls "resurfacing equity," meaning they had between 10 percent negative and 10 percent positive equity at the beginning of September.  This is about 18 percent of all homeowners with a mortgage.  These owners, the company says, are on track to have enough equity to sell their home sometimes in the next 15 months without resorting to a short sale. Despite what has happened to prices over the last seven years RealtyTrac estimates that 7.4 million homeowners, 16 percent of those with a mortgage, have 50 percent or more equity in their homes. 

"Steadily rising home prices are lifting all boats in this housing market and should spill over into more inventory of homes for sale in the coming months," said Daren Blomquist, the company's vice president.  "Homeowners who already have ample equity are quickly building on that equity, while the 8.3 million homeowners on the fence with little or no equity are on track to regain enough equity to sell before 2015 if home prices continue to increase at the rate of 1.33 percent per month that they have since bottoming out in March 2012."

The report says that 126,000 properties, about a quarter of those currently in foreclosure, had LTVs below 100 percent in September, about 24 percent of the total.  This was higher in several states including Oklahoma (54 percent), Hawaii (51 percent), New York (47 percent), and Texas (46 percent).

Blomquist said that homeowners in foreclosure with some equity have a better chance to avoid foreclosure without resorting to a short sale assuming they don't miss the opportunity to leverage that equity.  "Even homeowners deeply underwater have reason for hope, with about 150,000 each month rising past the 25 percent negative equity milestone - although it will certainly take years rather than months before most of those homeowners have enough equity to sell other than via short sale."

 States with the highest percentage of homes with LTVs of 125 percent or higher included Nevada (46 percent), Illinois (40 percent), Florida (40 percent), Michigan (38 percent), Rhode Island (34 percent), and Ohio (31 percent).

 Metro markets with the highest percentage of homes with resurfacing included Omaha (29 percent), Colorado Springs (29 percent), Tulsa (29 percent), Little Rock (28 percent), and Raleigh (28 percent).