The number of underwater properties in the U.S. dropped to its lowest level in two years in the first quarter of 2014, according to housing data source RealtyTrac.

Negative equity numbers fell to 17% of all properties with a mortgage, or 9.1 million residential properties, says the most recent U.S. Home Equity & Underwater Report. This represents about 2 million fewer seriously underwater properties from the fourth quarter of 2013, and the lowest level since RealtyTrac began reporting this data in early 2012. 

A home is “seriously” underwater when the combined loan amount secured by the property is at least 25% higher than the property’s estimated market value. 

Year-over-year, the level of underwater homes fell almost 17% from 2013’s first quarter to 10.9 million homes, or 26% of all properties with a mortgage. Negative equity levels peaked in the second quarter of 2012, when 29% of all properties with a mortgage were seriously underwater, for a total of 12.8 million homes.

On the flip side, the number of “equity rich” properties with at least 50% equity grew to 9.9 million in the first quarter of 2014, or 19% of all properties with a mortgage, up from 9.1 million last quarter. 

“U.S. homeowners are continuing to recover equity lost during the Great Recession, but the pace of that recovering equity slowed in the first quarter, corresponding to slowing home price appreciation,” said Daren Blomquist, vice president at RealtyTrac, in a statement. “Slower price appreciation means the 9 million homeowners seriously underwater could still have a long road back to positive equity.”

Nevada, Florida, and Illinois are among the states with the highest percentage of residential properties still seriously underwater in the fourth quarter, ranging from 30-34%. Michigan (29% of properties with a mortgage) and Ohio (27%) round out the top five.

Several major metropolitan statistical areas (MSAs) also still have significant levels of negative equity, including Las Vegas (37%), Lakeland, Fla. (36%), and Palm Bay-Melbourne-Titusville, Fla. (35%). 

Markets with the highest percentage of equity rich properties include San Jose, Calif. (39%), Honolulu and San Francisco (35%), Poughkeepsie, N.Y. (34%), and Los Angeles (32%). 

Access RealtyTrac’s Home Equity & Underwater Report for the first quarter of 2014. 

Written by Alyssa Gerace