Click on graphic to embiggen.
The average American home is worth 21% less now than it did five years ago and the market is glutted with cheap foreclosed houses. This is terrible for people who need to sell their homes, but are carrying mortgages that are bigger than their houses are currently worth.
Mortgage rates are at historically low levels, which combined with low home values should help new home buyers to enter the market.
Unfortunately, since a lot of this housing demand will be soaking up cheap supply created by foreclosure, Zillow expects home values will continue to fall modestly in most markets, even while home sales are rising.