Price declines are hurting a growing number of borrowers who bought since 2003, but none more than borrowers who bought at the peak of the nation's housing frenzy in 2006, according to data released Tuesday morning by real estate website Zillow. Nationwide, for those who purchased their home since the beginning of 2003, nearly one in three -- 29.1 percent -- now have negative equity, according to Zillow's data. The highest rates of negative equity are among those who purchased in 2006, when most markets peaked, as nearly half (45%) of those buyers across the U.S. now face negative equity after placing a median down payment of just 10 percent. The percentage of underwater borrowers in the Stockton MSA is even worse: nearly every homeowner who bought in 2006 -- with a median down payment of zero -- is now underwater. Record prices declines are putting an increasing number of borrowers into precarious situations. U.S. home values in the second quarter posted the largest year-over-year decline in the past 12 years, Zillow said Tuesday, dropping 9.9 percent from the year-ago quarter and 1.7 percent from the first quarter to a median estimate of $206,919. The median U.S. home value has not been this low since the fourth quarter of 2004, leaving 29.1 percent of homeowners who purchased since 2003 with negative equity. (And you wonder why we're sour on banks holding high concentrations of second liens.) Distressed real estate grows As the number of underwater borrowers grows, so too does the percentage of homes sold in distress. This quarter, Zillow added two new measures to its quarterly survey to capture the percentage of homes sold for a loss and the percentage of homes sold at foreclosure, which may prove to be a useful tool for anyone wanting to track the growth of distressed real estate. Nationwide, nearly one in four homes sold during the past year sold for a loss, Zillow said, while nearly 15 percent of sales were foreclosures. The picture is much worse in California: in the Golden State, more than 60 percent of homes sold in the past year were for a loss, while homes sold in foreclosure exceeded 50 percent. By comparison, in the New York- Northern New Jersey-Long Island MSA, which has the lowest rates of foreclosure among the markets monitored by Zillow, the percentage of homes sold for a loss since the second quarter 2007 is 8.8 percent and the percent of homes that sold in foreclosure is 3 percent. One in three homes sold in the second quarter were sold for a loss and 18.6 percent were foreclosure sales; one year ago, Zillow reported that those percentages were at 12.2 percent and 7 percent, respectively. "The second quarter is the sixth consecutive quarter of home value declines and we see little promise of turnaround in the short-term as the rates of decline have yet to slow and, in fact, actually accelerated in many markets," said Dr. Stan Humphries, Zillow's vice president of data and analytics. "The high rates of negative equity are having a direct effect on home sales figures as we've seen considerable growth in foreclosure transactions and homes selling for a loss. Unfortunately, while there are a few bright spots -- like Pittsburgh, Oklahoma City and Austin that reached record-high values -- most markets are likely to remain in negative territory for the next few quarters given the magnitude of current year-over-year declines." For more information, visit http://www.zillow.com.