For the first time since January 2007, the deterioration in national housing values is showing signs of slowing, according to a report from online real estate tracker Zillow.com.

According to the Home Value Index, a measure of median home values, the year-over-year depreciation (drop in home value) reversed during the second quarter of 2009.

The year-over-year, or annualized, depreciation measures the drop in the median home value over the previous 12 months.

In April, the annualized depreciation was 12.3% from the same month in 2008, down from 12.4% in March. In May, the depreciation reached 12.2% and in June, the decline in the median home value was 12.1% from June 2008.
 
The quarter-long drop in the rate of depreciation follows a 27-month stretch when the depreciation in median home values grew steadily larger.

“On a year to year comparison we’re seeing things getting better, whereas before for 27 periods in a row that number grew all the way up to 12.4%. “It was relentless.”

Overall, housing values have dropped more than 22% nationally since their 2006 peak.
This snapshot of home values is better than other indicators because it takes into account estimated values of all properties in a region, not just those that have sold.
 
But while some markets such as Los Angeles, Stockton and San Francisco, Calif., that were decimated by tanking real estate values have shown signs of a rebound, others -- including the New York metropolitan region -- have continued to drop.

Values in that region are down 21% from their peak and could continue to be dragged down by heavy depreciation in Manhattan. According to Zillow, there is only a small handful of areas in the country where home prices have increased over the past 12 months. Among those are Fayetteville, N.C. and Jacksonville, N.C., both homes to military bases, and Boulder, Colo., home to the University of Colorado.

Several factors could stand in the way of a nationwide housing recovery. High inventories still weigh down the market in most areas and those levels are not likely to drop anytime soon. Instead, inventories may be bolstered by large numbers of foreclosures which put more, cheaper houses on the market.
Increasing mortgage rates may also dampen the recovery as potential buyers find homes less affordable. “

Where we have to temper our enthusiasm is in the fact that some of the fundamentals of the housing market are still troubling, We still have high inventories, there are lots of foreclosures and there is even some evidence that foreclosure activity is picking up in some areas.”