About 50,000 fewer homeowners in the Boston area are “underwater” on their mortgages compared with the same time last year, data released this week show, another sign that the local housing market is on the upswing.
The number of underwater borrowers — those who owe more to lenders than their homes are worth — dropped to 129,671 in the first three months of 2013, down from 179,952 during the first quarter of 2012, according to Zillow Inc, a Seattle-based housing data tracking company.
That means about 15.9 percent of borrowers were saddled with so-called negative equity during the first three months of 2013, compared with 22 percent last year, Zillow said. The company defines the Boston metropolitan area as Essex, Middlesex, Suffolk, Norfolk, and Plymouth counties in Massachusetts, and two counties in southern New Hampshire.
The turnaround can be attributed to rising property values, pushed by a tight housing inventory and eager buyers motivated by low interest rates and generally upbeat news about the economy. The average value of a single-family home in the Boston area hit $321,700 during the first three months of 2013, compared with $306,600 last year, Zillow said.
The Massachusetts housing market continues to outperform the nation as a whole. Across the United States, 25.4 percent of mortgage holders were underwater in the first quarter, compared with 31.4 percent during the same three months in 2012. Home values nationwide increased to $157,500 in the first three months of 2013, from $150,000 last year, Zillow said.
Housing specialists say the decline in underwater real estate allows more financially struggling homeowners to sell their properties if needed and avoid foreclosure. In addition, rising equity provides an overall boost to the market’s recovery by persuading more people to list their homes for sale.
“Negative equity had a chilling effect,” said Paul S. Willen, senior economist for the Federal Reserve Bank of Boston. “As prices go up, people will start selling.”
But the number of borrowers stuck owing more than their homes are worth remains a major issue, said Zillow chief economist Stan Humphries. In a healthy economy, he said, virtually no one is upside down on their loan.
It could take four to six years for the Boston-area market to return to a healthy market and even longer nationwide, Humphries said.
The problem is actually larger than the statistics indicate, he said, because homeowners should have about 20 percent equity to cover costs needed to sell a home and buy another one.
That means nearly 34 percent of Boston-area homeowners have an “effective” negative equity rate, according to Zillow.
“The numbers are big and some of those people are substantially” underwater, Humphries said. “There’s a pocket of people whose mortgage debt is twice their home value.”
The problem in Massachusetts originated in 2005 when house prices reached a peak and began falling. By 2009, values were off by about 20 percent, according to the SP/Case-Shiller Home Price Indices. Values have fluctuated since then and are now about 16 percent below the high point, Case-Shiller said.
While increased sales and rising prices have prompted bidding wars in many popular Boston-area neighborhoods, negative equity is a serious damper on the market in some parts of the state.
In Plymouth County, for example, 21 percent of borrowers are underwater compared with 11.4 percent in Middlesex County, Zillow reported.
The contrast is even more dramatic when the figures are brought down to the community level. In the foreclosure-plagued city of Brockton, 44.9 percent of borrowers were underwater during the first three months of the year, compared with 3.5 percent in affluent Wellesley.
Emma Grigsby, a Brockton organizer with the nonprofit activist group City Life/Vida Urbana, said many Brockton homeowners hold mortgages more than double the value of their homes. Government-spurred efforts to push lenders to help buyers reduce monthly payments through loan modifications and principal reductions are not meeting the need, she said.
“You take a person who owes $400,000, the market value of their home might be $179,000 or $185,000,” Grigsby said. “People are showing up every day with the same problem.”
Humphries said an increasing number of properties for sale and rising interest rates will probably slow the rise of Boston-area home prices next year — to only about 1 percent above 2013 levels. But, he said, that still means many more homeowners will start to realize some equity on their properties.
