The latest report from Zillow.com indicates that home values were still falling in October and are now 5 percent below year ago levels.

From the peak just a few years ago, values have fallen by 25.8 percent. This dramatic drop closely mirrors that seen in the Great Depression, where home values fell 25.9 percent. These figures are not surprising when one considers the subprime mortgage crisis, rampant foreclosures (more than 7 million loans are delinquent or in foreclosure), and an unemployment rate of 9.8 percent.

All of these factors have contributed to an imbalance between supply and demand. And while foreclosure liquidations were down slightly for the month of October, Zillow.com attributes this to "the various moratoriums put into place in order to investigate documentation issues in the foreclosure processes in various states."

The current imbalance is further exhibited through a high supply of existing homes for sale, as well as a high supply of vacant homes. It's seen in negative home equity (as home values dropped, many homeowners have found themselves upside down in their mortgages). Homeowners in these situations are not likely to enter the market anytime soon.

The balance needed for a healthy housing market remains a distant hope. Necessary to the recovery are buyers returning to the market who can pay and maintain healthy mortgages. And in this cyclical cycle, the economy must improve, interest rates must remain low, and jobs must be created. All of these items will be incentives for the buyer to return to the market.

Published: December 16, 2010

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Carla Hill, M.A., works on the Realty Times staff as Managing Editor for our online publication. She also is Producer for the real estate news channel, seen daily on RealtyTimes.com and on video newsletters nationwide.