12 cities with the most underwater homeowners

While a decline in the rate of mortgage borrowers who owe more than their homes are worth is a promising sign of housing market recovery, many homeowners are still treading on the cusp of being underwater.

The nation's negative equity rate fell below 10% for the first time since the housing market crash, but the effective negative equity rate, which includes homeowners barely in the territory of positive equity, jumped in the fourth quarter, according to Zillow.

These borrowers may have less incentive or ability to put their homes on the market, as they have no equity to put toward a down payment on a new home. As tight inventory continues pushing home prices upward, affordability is becoming an even bigger challenge, for new and existing homeowners alike.

About one in seven homeowners, or 15.4%, have some equity in their home, but likely not enough for them to do much with it. In addition to homeowners with negative equity, these homeowners on the fringe helped push the national "effective" negative equity rate to 24.6% in 4Q17, Zillow said.

"For much of the country, the Great Recession is an increasingly distant memory. The American economy is booming once again and markets are now shifting their gaze to future downturn risks," Aaron Terrazas, Zillow's senior economist, said in a press release.

In the fourth quarter, 4.4 million homeowners remained underwater on their mortgages, with about 713,000 homeowners owing at least double their home's worth.

"Their struggles mean there are fewer homes on the market for homebuyers today. In corners of the country where home values have been stagnant in recent years, recent homebuyers can easily fall underwater, particularly those who buy with small down payments," Terrazas said.

Here's a look at 12 housing markets with the most underwater homeowners, ranked by the highest rate of effective negative equity. The data, from Zillow's Negative Equity Report, which uses home price data and TransUnion mortgage debt data to calculate homeowners' equity position in more than 870 metro areas.

Effective negative equity rate: 26.0%
Borrowers who owe 200% of home value: 14.8%
Total number of homes in negative equity: 61,917

Effective negative equity rate: 26.3%
Borrowers who owe 200% of home value: 16.4%
Total number of homes in negative equity: 93,663