Home values declined about 5.7 percent in the third quarter compared to the same quarter last year, according to a report by Zillow, an online real estate valuation and marketing company.

Zillow’s nationwide Zindex, which is based on the median of automated value estimates for individual homes, was $244,000 in the third quarter for all home types. It was the fourth consecutive quarter of decline for the U.S. Zindex.

Merced, Calif., had the largest year-over-year drop in Zindex value among a group of 84 metro areas reported by Zillow. The third-quarter Zindex, at $233,000 for Merced, fell 28.6 percent compared to third-quarter 2006.

Stockton-Lodi, Calif., was next on the list with a 24.8 percent year-over-year Zindex drop in the third quarter, followed by Naples, Fla., down 22.3 percent; Fort Pierce-Port St. Lucie, Fla., down 21.3 percent; and Santa Barbara-Santa Maria-Lompoc, Calif., and Punta Gorda, Fla., down 20.1 percent.

At the other end of the spectrum, the Zindex rose 13.8 percent in the third quarter for Grand Junction, Colo., compared to third-quarter 2006. Jackson, Tenn., had the second-highest Zindex rise at 10.1 percent, followed by Charlotte-Gastonia-Rock Hill, N.C.-S.C., at 8.9 percent; Corvallis, Ore.; at 6.8 percent; and Columbia, S.C., at 5.9 percent.

About 69 percent of the metro areas reported by Zillow experienced a drop in the Zindex value from third-quarter 2006 to third-quarter 2007.

California and Florida were home to all 10 metro areas with the highest level of year-over-year Zindex value loss in the third quarter, and 19 of the top 20 metro areas for value loss and 22 of the top 25 markets for value loss are also in those two states.

Zillow also reported that as of the close of the third quarter, 15.6 percent of homeowners nationwide who bought a home in the past year and 17.5 percent of those who bought a home two years ago have home values that are less than the original mortgage amount.

Meanwhile, 1.8 percent of those who bought a home five years ago have negative equity, according to the report.

Data in the report is accumulated from several public sources and is aggregated by a number of data providers. Mortgage and home loan data is typically recorded in each county and publicly available through a county recorder’s office, Zillow reported.

“Not surprisingly, markets with the greatest proportion of homes with negative equity were those hit hardest by declining values,” Zillow reported. “For example, people who purchased homes in California’s Central Valley, parts of Florida and Las Vegas during the past year have seen double-digit depreciation and negative equity rates reach up to five times the national median.”

Stan Humphries, Zillow’s vice president of data and analytics, said in a statement that the decline in home values “picked up steam in the third quarter, posting the largest nationwide year-over-year drop in more than a decade.”

Value depreciation and a downward trend in the size of mortgage down payments have left some homeowners “upside down” on their mortgage, Humphries also said.

“The run-up in home values we saw over the last several years had many home buyers counting on continued housing appreciation to drive home equity growth, but the market has proven that this strategy is no longer a safe short-term bet.”

Americans who bought a home in the last two years placed a median down payment of 10 percent and now have a median of 13 percent equity in their investment.

And homeowners who bought five years ago placed a median down payment of 11 percent, saw home values grow at an annualized rate of 9.4 percent over the past five years, and now own a median of 41 percent of their home, according to the report.

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