Home Values to Fall by $1.7 Trillion

There was some more discouraging news about the housing market today: 2010 will likely end up being worse for home values than 2009.

Real estate Web site Zillow released a report that said the value of American homes is expected to drop by $1.7 trillion this year, a 63% bigger drop than the $1.05 trillion decline seen in 2009. The report cited the expiration of the government's homebuyer tax credits, as well as higher foreclosure rates.

Home values have plummeted more than $9 trillion since the housing market peaked in June 2006. That's nearly 12 times the $750.8 billion cost of the war in Iraq from 2001 to the end of September 2010, Zillow said, citing a report from the Congressional Research Service.

"Unfortunately, with foreclosures near an all-time high in late 2010 and high rates of negative equity persisting, it does not appear that the first part of 2011 will bring much relief," Zillow Chief Economist Stan Humphries said in a statement.

Not all of the 129 metropolitan areas that Zillow tracks saw home values fall this year -- Boston, San Diego and 29 other metropolitan areas showed gains. Still, that means more than 75% of the metro areas suffered declines, and the report added to concerns that more homeowners are underwater in their mortgages, which means they owe more than their homes are worth. In the third quarter of 2010, 23.2% of single-family homeowners with mortgages were underwater, a higher percentage than the 21.8% at the end of 2009.

"The hope is that the market will reach a bottom sometime next year, and that average rates of appreciation will return sometime in the next three to five years," Zillow's report said.