Negative home equity fell across 850,000 households during the first quarter, taking them from negative equity to positive, according to the latest data release from CoreLogic. 

There are still 9.7 million homes underwater as of the end of the first quarter, but the count is falling, CoreLogic data indicates, from a total of 10.5 million underwater homes at the end of the fourth quarter of 2012.

The trend is bolstering price recovery in many markets, CoreLogic says. 

“The impressive home price gains of 2012 and the beginning of 2013 have had a big impact on the distribution of residential home equity,” said Dr. Mark Fleming, chief economist for CoreLogic. “During the past year, 1.7 million borrowers have regained positive equity. We expect the pent-up supply that falling negative equity releases will moderate price gains in many of the fast-appreciating markets this spring.”

However, the price recovery remains an uphill battle as negative equity continues to subside. 

“The negative equity burden continues to recede across the country thanks largely to rising home prices,” said Anand Nallathambi, president and CEO of CoreLogic. “We are still far below peak home price levels, but tight supplies in many areas coupled with continued demand for single family homes should help us close the gap.”

Of the 39 million residential owners who do have positive equity, 11.2 million have less than 20% equity.

Written by Elizabeth Ecker