Home values in the first quarter fell 7.7 percent compared to the same quarter last year, according to an index based on Zillow.com‘s automated home valuations.

It was the steepest year-over-year drop in the past 12 years, according to Zillow’s Zindex report, released today.

The Zindex, which was expanded in the first quarter to cover 160 U.S. metropolitan areas, found that the median U.S. Zindex value for those markets was $213,000 — the lowest since second-quarter 2005. The Zindex value declined 33.5 percent year-over-year in the first quarter in Stockton, Calif.

The Zindex is based on automated price valuations, dubbed Zestimates, for all homes in a given market area. The Zindex counts all homes for which Zillow has records, including for-sale and not-for-sale homes.

One-third of the 160 markets had double-digit-percentage declines in value in the first quarter compared to the same quarter last year, Zillow reported, and 130 of 160 markets had year-over-year value depreciation in the first quarter.

About 90 percent of the 160 markets had positive annual appreciation over the past five years.

For the group of 160 metro areas, the Zindex value was down 1.6 percent in the first quarter compared to fourth-quarter 2007.

"We’re clearly in a period of market correction," said Stan Humphries, Zillow’s vice president of data and analytics, in a statement. "Most major cities, particularly those on the coasts, which bubbled in recent years are the same ones dropping record levels year-over year.

"What’s interesting is regardless of whether a market surged in the last few years or remained more steady, like in the South and Midwest, the rates of appreciation over the last five- and 10-year periods are positive and relatively consistent with what we typically expect to see over time — mid-single digits."

The recent value declines have put many recent home buyers underwater, Zillow reports.

Among those homeowners who purchased when home values peaked in 2006, 51.6 percent now owe more on their mortgage than their home is currently worth, according to the Zindex report.

For those who purchased a home in 2005, about 42 percent owe more than their home is worth, and 45 percent of those who bought in 2007 face negative equity, Zillow reported. And about 16 percent of those who bought in 2004 and 7 percent of those who bought in 2003 have negative equity.

In the Las Vegas metro, about nine out of 10 homeowners who purchased in 2006 owe more than their home is worth.

A Zillow report on the 30 largest U.S. metro areas found that Dallas was the only market to see a year-over-year rise in Zindex value in the first quarter, up 1.1 percent to $130,500.

New Orleans had the slightest year-over-year decline in Zindex value in the first quarter, down 1.3 percent to $148,500. New York was next with a 1.4 percent year-over-year decline, to $418,500.

California is home to five of the 10 largest U.S. metro areas with the highest year-over-year drop in Zindex value in the first quarter, and three of the top-10 metros are in Florida.

The Riverside, Calif., metro area topped the list with a 26 percent year-over-year decline in the Zindex, to $287,500. Sacramento, Calif., was next with a 20.5 percent decline, followed by Orlando, down 19 percent; Miami, down 18.8 percent; Tampa, down 17.1 percent; San Diego, down 16.9 percent; Los Angeles, down 16.4 percent; Detroit and Phoenix, down 15.9 percent; and San Francisco, down 13.4 percent.

Detroit had the largest five-year annualized decline in Zindex value among these 30 largest metro areas, falling 4.5 percent. Cleveland had a 1.5 percent decline and Boston dropped 0.4 percent.

The Virginia Beach, Va.-N.C., metro area had the largest five-year annualized gain, up 12.2 percent; Baltimore was up 10 percent; and Portland was up 8.9 percent.

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