Zillow Says Real Estate Market Isn't Improving All That Much

(MoneyWatch)  This morning, Zillow released the results of its first quarter 2010 market report:

• Home values continued to decline in the first quarter of 2010. The Zillow Home Value Index fell 3.8 percent year-over-year, and 1 percent quarter-over-quarter, to $183,700. Home values fell in 106 of 135 markets tracked.
• More homeowners are underwater. 23.3 percent of single-family homes with mortgages underwater, up from 21.4 percent in the fourth quarter of 2009
• Foreclosures reached a new peak in March. More than one out of every 1,000 (0.11 percent) U.S. homes going into foreclosure during the month.

And here's what passes for the good news portion of the survey: Several large markets in California, including Los Angeles, San Diego, San Francisco, Santa Barbara and Ventura County, look like they're stabilizing.

In a press release accompanying the survey results, Zillow Chief Economist Dr. Stan Humphries said:

"It's a very positive sign that several large markets have hit what appears to be a tentative bottom in home values. While this is no guarantee that home values there will not fall again, it is more likely than not that they will remain above their lowest point last year."

"However, we continue to have concerns about other factors playing out in markets across the country. We suspect that the homebuyer tax credits are, for the most part, stealing demand from later this summer, rather than creating new demand. Even with the tax credits in place during the first quarter, inventory levels were rising, and home values continued to decline at a steady clip, rather than steadying. Because of these factors, we believe national home values are more likely to reach bottom in the third quarter of 2010, rather than in the second quarter, as we had hoped. When we do get there, we expect the high rates of negative equity and foreclosures to keep national home value appreciation near zero for some time, possibly as long as five years."

Humphries makes the argument that the home buyer tax credits have only served to artificially inflate home buyer demand. He believes that home prices won't hit rock bottom until 3Q 2010. That's going to be a bitter pill for any seller to swallow.

Read More:

• What Can You Buy For $950,000?
• What Can You Buy For $625,000?
• What Can You Buy For $250,000?
• What Can You Buy for $35,000?
• What Can You Buy For $35,000 (Part II)
• Did Realtors Cause The Housing Crisis?
• 3 Reasons Why Now Is The Best Time To Buy a Home
• Underwater With Your Mortgage? So Are A Growing Number Of Homeowners
• 2010 Will Start With Strong Home Sales. But What Happens After The Home Buyer Tax Credits End?

Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com.