Joe Wilson's Silicon Valley Real Estate Blog

The national housing market may reach bottom in the first half of 2011, but probably not before then because of a growing number of foreclosure sales,  according to the Zillow Real Estate Markets Report released today.

Home values are 25 percent below their peak and have fallen for 51 straight months. From the end of 1928 to the end of 1933, a period of 60 months, nominal home values fell 25.9 percent, according to a recostruction of home prices by housing expert Robert Shiller, co-developer of the Case-Shiller Home Price Index.

Home values dropped again from August to September by 0.4 percent. They fell 4.3 percent from last year, Zillow reported.

Zillow’s figures may not be as bad as they seem. Home sale prices typically fall in the autumn as the summer main home-buying season draws to close. Families with children, who tend buy larger homes, prefer to move in the summer while their kids are out of school. The end of the federal home-buyers tax credit also probably had an impact.

Still, the figures are not encouraging. Out of 145 markets followed, home values declined in 112, were flat in 13 and up in 20. In five areas, including San Francisco, Los Angeles, San Diego, Ventura and San Jose, home values began to fall again after five consecutive quarters of increases. As expected, the end of state-funded tax credits prompted home values in California to fall.

There were more foreclosures at the end of the third quarter than since 1996. Foreclosure rates will remain high due to negative equity, or mortgages that are more than home values, the company predicts.

Foreclosure re-sales almost set record in September when they accounted for 20.1 percent of all sales during the month. That ignominious record was set in March 2009 when 20.5 percent of sales were foreclosed homes. The housing market will easily break that record this winter when the volume of non-foreclosure sales drops due to seasonality, Zillow predicts

The good news is that at least home buyers can get some deals this winter. Home prices traditionally drop over the winter, as home sellers selling then may be more desperate, or at least are perceived as desperate.