Fewer Americans were upside down on their homes — owing more on their mortgages than what their homes are worth —  in the third quarter than in the second quarter, according to a report released Tuesday by CoreLogic (CLGX). The report also noted that California dropped out of the top five states with the most negative equity, a position it's held since 2009. Last quarter, 10.9 million properties, 22.5% of all mortgages, were underwater. Now 10.7 million are considered in negative equity, or 22.1%. An additional 2.4 million borrowers hold less than 5% equity, which CoreLogic refers to as near-negative equity, in the third quarter. "The nearly $700 billion mortgage debt overhang has touched many corners of the market, and this overhang is holding back the recovery of the housing market and broader economy,” said Mark Fleming, chief economist with CoreLogic. "Negative equity remains very high and renders many borrowers vulnerable when negative economic shocks occur, such as job loss or illness," Fleming added. The top five states for negative equity retain more than 40% of underwater homes in the nation. According to CoreLogic, Nevada has the highest negative equity percentage with 58% of all of its mortgaged properties underwater, followed by Arizona (47%), Florida (44%), Michigan (35%) and Georgia (30%). This is the first quarter that Georgia entered the top five, surpassing California which had been in the top five since tracking began in 2009, CoreLogic said. CoreLogic data includes 48 million properties with a mortgage, which accounts for over 85 percent of all mortgages in the U.S. Write to Jacob Gaffney. Follow him on Twitter @jacobgaffney.