Here's a little nugget of good news for the Twin Cities housing market: The number of homeowners in the metro who have mortgage that exceeds the value of their house continues to fall, and is below the national average. Zillow says that in the Twin Cities metro, 107,785 homeowners – 15.6 percent of all homeowners with a mortgage – were underwater during the third quarter. That's down from 21.1 percent a year ago and 60.1 percent below the peak. Nationwide, the negative equity rate fell from 16.9 percent from 31.4 percent at the peak.

Here's what Zillow's chief economist, Stan Humphries, had to say about the situation: "Looking at negative equity helps us understand so many of the currently out-of-whack dynamics in the housing market, including low inventory, rapid home value appreciation and weak sales volumes. None of these problems will be solved overnight, in large part because negative equity will likely be a part of the housing market for years, and easily into the next decade in some hard-hit areas. But we're moving in the right direction, and time will heal all wounds."

Nationwide, owners of less-expensive homes were more likely to be underwater than owners of more expensive homes. In Detroit, for example, 49.2 percent of homes valued in the bottom price tier were underwater, while just 7.6 percent of the area's highest-priced homes were upside down. And in Chicago, 41.4 percent of bottom-tier homes were in negative equity, compared to 23.9 percent of middle-tier homes and 10.4 percent of top-tier homes. Nationwide, 27.4 percent of the least-expensive homes were in negative equity in the third quarter, compared with 15.7 percent of middle-tier homes and 9.3 percent of top-tier homes.