Updated 11/8/11 - 9:39 p.m.
CHICAGO (CBS) -- The Chicago area housing crunch is not getting any better. It appears to be getting worse.
CBS 2's Mike Parker reports a new study by the Zillow, Inc., real estate group shows 46.2 percent of single family homeowners in the area now owe more on their mortgages than their homes are worth.
That represents an increase from 32.9 percent a year earlier, according to the report. It also is up from 42.2 percent in the second quarter.
The report showed home values dropped 9 percent from the third quarter of 2010 and dipped 1.1 percent from the second quarter.
Home values have fallen 37.4 percent since their peak in July 2006 and are now back to the level they were in December 2000, according to Zillow.
The report showed 43.4 percent of all homes sold in the area in September sold for a loss.
Northwestern University Professor Tom Lease tells WBBM Newsradio that he's mildly optimistic.
He says Chicago's position is better than many housing boom cities because Chicago has a relatively well diversified economy.
Lease also says he thinks the 46 percent underwater figure is misleadingly high because many underwater homeowners will keep paying rather than face problems associated with default. He says many in that figure are just slightly underwater rather than ready to default.
Professor Lease says the housing situation will be cured when employment picks up significantly, and that, he says, is hard to predict.
The Ruiz family of Aurora, one of millions around the nation whose mortgages are "underwater," wants everyone to know they are not deadbeats. They have a growing marketing business and they always pay their $1,850 mortgage payment on time.
"We are a young couple that's doing all the right things," Jackie Camacho-Ruiz said.
But, like hundreds of thousands of other homeowners in the Chicago area, due to plummeting home values, they can't get a bank to modify their loan to refinance. They are among the nearly 50 percent of Chicago area homeowners who now owe more than their house is worth.
After four years, the Ruiz family is under water on their mortgage. They owe $192,000 on a two-story townhouse that's now worth $150,000.
Juan Ruiz said he knows some people might just walk away from their home in a situation like his, but he said, "This was our first house and, you know, there's emotional attachment."
His wife, Jackie Camacho-Ruiz, said, "We didn't want to take the easy route, like a lot of people when they just let it go."
Chicago realtor Mabel Guzman said the Ruiz family made a good choice.
"One option I do recommend is do not walk away from your home. Do whatever you can to keep it. Try the modification program, try refinancing," Guzman said.
Camacho-Ruiz said they've tried that, but the bank has turned them down.
"It's frustrating to know that they can't look at us at a case-by-case scenario, that's it's because the house value is down," she said. "I think that's going to be the happy ending, if the banks were willing to work with us in creating a happy ending."
Nationally, the Zillow report revealed 34.4 percent of all homes sold in September sold for a loss, and 28.6 percent of homes had negative equity in the third quarter, up from 23.2 percent a year earlier and up from 26.8 percent in the second quarter. Prices are down 28.8 percent from their peak in June 2006.
Zillow has forecast the still struggling housing market won't hit bottom until next year at the earliest.
(The Sun-Times Media Wire contributed to this report.)
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