NEW YORK ( MainStreet) — The number of "underwater" homeowners fell at its fastest pace ever in the third quarter. Unfortunately, about one in five homeowners with a mortgage still owes more than the home is worth, and if those who are close to being underwater are included, the figure remains a dismal 39%.

That higher "effective" negative rate includes homeowners whose equity, or current home value minus remaining mortgage debt, is less than 20%. After paying a sales commission and other selling costs, such a homeowner may not have enough money left for a down payment and other costs of buying a new home.

At 39%, that's a lot of homeowners who are effectively trapped in their homes, unable to move, for example, for a new job. This is one reason the inventory of homes for sale is relatively low, hampering the housing market's recovery.

Still, the trends are positive. Zillow the home-listing firm that compiled the data, notes that the percentage of underwater, or negative-equity homes, has fallen by a third from the peak of 31.4% in the second quarter of last year. Because about a third of all homeowners own free and clear, without a mortgage, the overall underwater rate is 14.7%.

"Rising home prices and a greater willingness among lenders to engage in short sales have both contributed substantially to the significant decline in negative equity this quarter," Zillow Chief Economist Stan Humphries says. "We should feel good that we're moving in the right direction and at a fast clip.

"But negative equity will remain a factor for years to come, and must be considered part of the new normal in the housing market. Short sales will remain a persistent feature of the market as many homeowners remain too far underwater for reasonable price appreciation alone to help."

Home prices soared by more than 12% over the past year or so, helping to get millions of homeowners above water. But Zillow expects home appreciation to slow to about 3.8% over the next 12 months, making it harder for underwater homeowners to move into the black. Nearly 56% of underwater homeowners are deeply underwater — by 20% or more.

Las Vegas and Atlanta have the worst underwater rates, at 39.6% and 38.2%. San Jose and Denver have the lowest, 7.6% and 11.9%.

What do you do if you are underwater? The first step is to estimate just how deep you are by looking at prices of comparable homes using sites such as Zillow.com, Realtor.com and Trulia.com .

If the home still suits you, muddling along is probably the best option. For an ordinary sale, you'd have to come up with other money to make up the difference between what the home will fetch and what you owe your lender.