real estate Fewer U.S. mortgages are now classified as underwater -- where the home is worth less than the amount owed on the loan -- driven by a greater number of foreclosures, a new report shows.

The percentage of single-family homes with negative equity mortgages fell to 21.5% in the second quarter, from 23.3% in the first quarter, according to the Zillow Real Estate Market Reports.

"While fewer homeowners were underwater in the second quarter than the first, it is not yet time to break out the champagne bottle," Stan Humphries, Zillow chief economist, told Reuters in an interview.

"While some of the downward pressure on negative equity is coming from stabilization in home value trends, the larger factor is the enormous volume of foreclosures occurring within the stock of homes in negative equity," Humphries said.

Home values fell 3.2% in the second quarter from a year earlier. It was the 14tth quarter in a row to post an annual decline in prices, Reuters said. Home values fell in 99 of the 144 metropolitan statistical areas tracked by Zillow.

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