Zillow is seeing a few pinpricks of light among continuing dark news about residential sales.

The Seattle-based real estate services company provides on-line information on home values in a number of markets based on a metric using information on recent sales and data on local assessments to compute “Zestimates” which are used by consumers to judge the value of their homes and those of their neighbors.  

Based on its huge data base the company also provides a quarterly Home Value Index which its press release compares to the Case-Shiller and Federal Home Finance Agency reports.

The second quarter 2009 report was released on Tuesday.  It reported that, while home prices have continued to fall for the 10th quarter in a row, the rate of decline has flattened significantly.

U.S. home values were down 12.1 percent year-over year to an index average of $186,500.  This is a smaller year-over-year change than the 12.4 percent decline reported for Quarter 1 and much of those losses occurred early in the quarter.  Prices fell less than 1 percent from May to June.

Total home sales were down 23.7 percent in June compared to June, 2008 but sales were actually 3.8 percent higher in June than in the previous month.

The Zillow data covers 161 metropolitan statistical areas.  In 39 of these markets home sales year-over year increased and in 142 markets the rate of declining sales has been lower than the previous reporting period for at least three consecutive quarters.  Of the 39 markets marking increases, some such as Miami-Fort Lauderdale, Los Angeles, and Phoenix were among those hardest hit when the market crashed.

There was not, however, good news everywhere.

Zillow reported that 22 percent of all sales in June were of properties that had been foreclosed by a lender and 29.2 percent of homes sold that month brought in less than their owners had paid for them.   Even homeowners who are staying put are still being hit hard; Zillow reported that 23 percent of all owners of single family homes owe more on their mortgages than their homes are worth.

One of Zillow’s more interesting findings was the amount of pent-up inventory that may be waiting in the wings.  29 percent of the homeowners who responded to the Homeowner Confidence Survey portion of its report indicated that they would be somewhat likely to put their homes on the market if they saw signs of improvement.

Stan Humphries, Zillow chief economist commented, "While we are encouraged by the increasing sales in many markets and the overall improvement in the rate of decline of the Zillow Home Value Index, I hesitate to be overly optimistic for the near future.  There are still many hurdles to true market recovery. Foreclosure re-sales are buoying overall sales numbers, but their low prices are keeping home values down. Reports of increasing mortgage defaults signal that foreclosures are likely to increase again and peak in mid-2010. With increasing unemployment and high rates of negative equity, we have a fertile breeding ground for even more foreclosures, which add to the already-high level of for-sale inventory that needs to be cleared before values begin to rise.

"While the abundance of affordable foreclosure properties is a boon for many first-time homebuyers, I don't believe we'll see significant recovery until demand-side fundamentals improve, and more move-up and move-across buyers re-enter the market."