Zillow is projecting that home values across the country are expected to have gone down approximately $700 billion in 2011, which would be 35% less than the $1.1 trillion that was lost in 2010.

The Seattle, Wash.-based real estate provider said the majority of the losses occurred in the first half of the year. From January to June, the housing market experienced a loss of $454 billion, while Zillow is estimating that residential home value losses will be about half ($224 billion) during the second half of 2011.

“While homeowners suffered through another year of steep losses, the good news is that homes are losing value at a substantially slower pace as the market works its way towards the bottom,” said Stan Humphries, chief economist at Zillow. “Compared to last year when we saw sharp declines following the expiration of the homebuyer tax credits, this year we saw some organic improvement in home values, in terms of a slowed depreciation rate which resulted in a smaller total value loss for the year.”

Out of 128 Metropolitan Statistical Areas analyzed in this report, 92% showed home value losses this year.

Los Angeles was the largest MSA that saw its residential properties lose the most money, down $75.5 billion. Other cities that experienced a yearly downfall in home values were New York ($44.8 billion), Chicago ($41.7 billion) and Atlanta ($29.6 billion).

There were only nine markets nationwide that saw home value gains during 2011, led by New Orleans at $3.5 billion. Pittsburgh was second on this list with a $2.7 billion increase.

Humphries said he is not optimistic for a turnaround in home prices during 2012.

“Unfortunately, when we look ahead to next year, the unabsorbed pool of housing supply, dragging levels of consumer confidence, high unemployment and negative equity will continue to put downward pressure on the housing market, pushing our expectation for a potential recovery into late 2012 or early 2013,” Humphries added.

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