U.S. home values may fall $2 trillion

U.S. homeowners may lose more than $2 trillion in the value of their properties this year, leaving about 11.7 million households owing more on their mortgages than their homes are worth, according to Zillow.com.

U.S. home values dropped by $1.9 trillion between the start of the year and Sept. 30, and they are likely to fall further this quarter, Zillow, a Seattle-based provider of real estate data, said in a study released Monday. That exceeds the $1.24 trillion lost in all of 2007, according to Zillow.

By the end of the third quarter, 14.3 percent of single-family homeowners owed more than their properties were worth, known as being under water, Zillow.com said.

"Nationwide, we haven't had a drop like this probably since the Great Depression, in terms of how much value has been taken out of the housing market," said Stan Humphries, Zillow's vice president of data and analytics. "The amount of negative equity that you're seeing out there right now is so great that it now has its own dynamic of causing people to walk away from their homes."

The drop in home values comes amid soaring foreclosures, record job losses and a national recession. One in 10 homeowners in the U.S. fell behind on mortgage payments or was in foreclosure during the third quarter, the Mortgage Bankers Association said this month. The number of Americans filing initial jobless claims rose to 573,000 the week ended Dec. 6, the highest level since 1982, according to the Labor Department.

Of the 163 metropolitan areas Zillow tracks, the Stockton, Calif., area was hardest hit, when comparing the median home value during the first nine months of 2008 against the median value in the same period in 2007. It slid 32 percent from a year earlier to $210,179.

The five worst-performing housing markets of 2008 were all in California, the most populous state, the data provider said. Stockton is followed by Merced, where home values dropped 31 percent in the year; Modesto and Salinas, where there was a 30 percent decline; and the Vallejo-Fairfield region, with a 28 percent drop.

Prices advanced in 30 areas, on that basis. Jacksonville, N.C., had the biggest increase, with the median home value rising 4.9 percent to $139,261. That was followed by Winston-Salem, N.C., with a 4.1 percent rise, and Anderson, S.C., with a 3.5 percent increase. Four of the five regions with the biggest gains were in the Carolinas.

The data for Zillow's study dates back to 1996 and is aggregated from publicly available records, the company said. Home values include single-family houses, condominiums and cooperatives. There are 91 million such properties in the country, according to Zillow.

While some areas, such as San Francisco and parts of South Florida, seem to be stabilizing, it's unclear whether next year will be better for home values, Humphries said.

"Normally we're not fortune tellers, and right now it's really dangerous to be a fortune teller, especially given what's going on in the larger economy," he said.

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E-mail: dtaub@bloomberg.net.