Amid a housing market where property values are still falling, Q109 left more than a fifth — 21.9% — of all American homeowners with negative equity, according to data released today by Zillow.com. That’s a significant jump from the 17.6% of all homeowners who sat underwater in the prior quarter. At first quarter’s end, home values posted a year-over-year decline of 14.2% says Zillow. After nine consecutive quarters of declines, eight regions – including the Modesto, CA, Stockton, CA and Fort Myers, FA regions – have now experienced median value declines of more than 50% since their peaks. This potentially means a large handful of troubled homeowners will not qualify for the Obama administration’s home refinancing program. In order to be eligible, a homeowner’s mortgage must not exceed 105% of the current value of the home. Nonetheless, slowing declines are an early sign of improvement, says Stan Humphries, Zillow vice president of data and analytics. Several hard-hit markets in California, like Los Angeles, San Diego and Modesto, saw at least two consecutive quarters of smaller year-over-year declines in home values. Meanwhile, potential sellers appear to be waiting on the sidelines until evidence of an improved housing market emerges. In a separate survey of homeowner sentiment, one-third of homeowners said they would be at least somewhat likely to put their homes on the market in the next 12 months if they saw signs of a recovering real estate market. One-third of homeowners indicate they would like to put their home on the market if conditions improve, which presents some fear that a bottom in home values could be quite protracted, as shadow inventory makes its way into the market. “By our calculations, this could translate into as many as 20 million homes that could seep into the market as prices stabilize, maintaining a constant stream of supply that far outpaces demand, thus keeping prices flat,” Zillow said in a press release. Chairman of the Federal Reserve, Ben Bernanke, offered a glimpse of hope yesterday saying the United States economy should begin a fragile recovery by the end of this year, which would seemingly boost activity within the housing market. Write to Kelly Curran.

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