40 percent of Las Vegas homeowners underwater, still highest in U.S.

A view of a neighborhood with three-story homes in Las Vegas, April 4, 2013.

Despite continued improvements, Las Vegas is still the underwater capital of America.

The valley’s rate of upside-down borrowers — homeowners whose mortgage debt outweighs their home value — was 39.6 percent last quarter, down from 63 percent a year ago, according to a new report from Zillow.

At the peak in early 2012, 71 percent of local borrowers were underwater.

Las Vegas had the highest rate last quarter among the 30 metro areas listed in the report. Nationally, 21 percent of borrowers were underwater.

Things are improving because of rising home values. Locally, they climbed 33 percent over the past year, the second-fastest rate in the country, according to Zillow.