Home values in the United States extended their fall in the first
quarter, with more than one in five homeowners now owing more on their
mortgages than their homes are worth, real estate website Zillow.com
said on Wednesday.

U.S. home values posted a year-over-year decline of 14.2 percent to
a Zillow Home Value Index of $182,378, resulting in a total 21.8
percent drop since the market peaked in 2006, according to Zillow's
first-quarter Real Estate Market Reports, which encompass 161
metropolitan areas and cover the value changes in all homes, not just
homes that have recently sold.

U.S. homes lost $704 billion in value during the first quarter and
have depreciated $3.8 trillion in the past 12 months, according to
analysis of the reports.

Declining home values left 21.9 percent of all American homeowners
with negative equity by the end of the first quarter, Zillow said.

By comparison, 17.6 percent of all homeowners owed more on their
mortgage than their property was worth in the fourth quarter of 2008,
and 14.3 percent were underwater in the third quarter of last year, the
reports showed.

Nine consecutive quarters of declines have left eight regions --
including the Modesto, California, Stockton, California, and Fort
Myers, Florida regions -- with median value declines of more than 50
percent since those markets peaked.

In 85 of the 161 markets covered in the report, the annualized
change over the past five years is negative or flat, the reports showed.

But in an early sign of improvement, 17 metropolitan areas across
the country -- notably several hard-hit markets in California,
including Los Angeles, San Diego and Modesto -- have seen two or more
consecutive quarters of smaller year-over-year declines in home values,
the reports showed.

Meanwhile, potential sellers appear to be holding back until
evidence of an improved housing market. In a separate survey of
homeowner sentiment, nearly one-third, or 31 percent, of homeowners
said they would be at least somewhat likely to put their homes on the
market in the next 12 months if they saw signs of a recovering real
estate market, the reports showed.

Slowing declines in select markets are a bright spot or, at least,
what passes for one given current market conditions, Dr. Stan
Humphries, Zillow vice president of data and analytics, said in a

Unfortunately, given the magnitude of the current rates of decline,
we're still many months away from a bottom even as depreciation slows,
he said. Moreover, the additional information we have this quarter on
'shadow inventory,' with one-third of homeowners indicating they would
like to put their home on the market if conditions improve, confirms
our earlier fears that a bottom in home values could be quite

By our calculations, this could translate into as many as 20
million homes that could seep into the market as prices stabilize,
maintaining a constant stream of supply that far outpaces demand, thus
keeping prices flat. I'm doubtful that we'll see the bottom until 2010,
and thereafter it's increasingly clear that we're likely to have a long
bottom before we see meaningful recovery in home values, Humphries

Of all transactions is the past 12 months, 20.4 percent were
foreclosures, up slightly from 19.9 percent in the fourth quarter,
while 11.9 percent of homes sold were short sales, also up slightly
from 10.9 percent in the fourth quarter, the reports showed.