Zillow projects Real Estate Value loss $1.7Trillion

According to a newly released report, the value of US homes is set to drop by $1.7 Trillion in 2010.

With these newest numbers, the total residential home value loss since the market peak of June 2006 is more than $ 9 Trillion. This 2010 loss is 63% more than the $1 Trillion lost in 2009, signalling a significant deepening of losses.

To put these numbers in a frame of reference, from 2001 to the end of September 2010, the war in Iraq has cost $750.8 billion, according to a September report by the Congressional Research Service.

Most of the total loss in value happened during the second half of 2010. From January to June, the housing market lost a staggering $680 billion.  Projections at this point for June to December for residential home value losses will top $1 trillion, according to Zillow.

Only 31 of the 129 markets tracked by Zillow posted gains in total home values during 2010. Included in those were the Boston metropolitan statistical area (MSA), which gained $10.8 billion in value, and the San Diego MSA, which gained $10.2 billion.

"Despite a strong start to 2010, by the end of the year homes lost more of their value in 2010 than they did in 2009," said Zillow Chief Economist Dr. Stan Humphries. "Government interventions like the homebuyer tax credit helped buoy the market during the second half of 2009 and the first half of 2010, but we saw a renewed downturn in the last half of this year.  It's a testament to the nearly irresistible force of the overall market correction that government incentives can only temporarily hold back the tide, and that the market will ultimately find its natural equilibrium of supply and demand. “

"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."

As a result, the drop in home values have led inevitably to increases in the percentage of homeowners in negative equity. At the end of 2009, 21.8 % of single-family homeowners with mortgages were in negative equity, owing more on their mortgage than their home was worth. In the Q3 of 2010 – the last time Zillow calculated negative equity – 23.2 % reported having negative equity.