Home values in the United States fell for the eighth consecutive quarter, declining 11.6 percent during 2008 to a Zillow Home Value Index of $192,119, according to the fourth quarter Zillow Real Estate Market Reports, which encompass 161 metropolitan areas.

The declines mean that U.S. homeowners lost a cumulative $3.3 trillion in home values during 2008, with much of that loss coming in the fourth quarter. Homeowners lost $1.4 trillion during the fourth quarter alone; more than the $1.3 trillion lost during all of 2007. Since the housing market's peak in 2006, $6.1 trillion in home values have been lost.

Foreclosures made up nearly one in five of all transactions in 2008. The hard-hit Central Valley in California continued to lead the nation in foreclosures, as more than half of all sales in the Madera, Merced and Stockton metropolitan statistical areas (MSAs) were foreclosures. The New York City metro area and the Grand Junction, Colorado area had the lowest rates of foreclosure in the country, both at 3.9 percent.

For the first time, Zillow has also calculated short sales. Across the country, 10.9 percent of all real estate transactions in 2008 were short sales. The Lincoln, Nebraska, MSA led the country in the rate of short sales, with 14.1 percent of all transactions. In the San Jose, Santa Rosa and Santa Cruz, California MSAs, short sales made up more than 11 percent of all transactions.

As home values declined through 2008, more American homeowners have become underwater on their mortgages. At the end of the year, 17.6 percent of all homeowners had negative equity. The number rose from the end of the third quarter, when 14 percent of homeowners were underwater.

Meanwhile, several markets that had been declining at a slower rate than most of the country showed accelerated declines in the fourth quarter. The Seattle, Washington and Portland, Oregon MSAs for the first time in the fourth quarter experienced year-over-year median home value declines, coming in at 12.1 percent and 11.7 percent, respectively, that were larger than the national median. In Manhattan, which posted year-over-year gains during the first three quarters of the year, home values declined during the fourth quarter, leaving Manhattan with a year-over-year decline of 5.8 percent by the end of 2008.

"A witch's brew of economic insecurity, foreclosures and tightened lending standards are helping to keep hard-hit markets down and to widen the scope of markets showing declines in home values," said Dr. Stan Humphries, Zillow's vice president of data and analytics. "As more markets turn down and markets that were already down go deeper, the pace at which value is being erased from the U.S. housing stock is rapidly increasing, with more value wiped out in the fourth quarter of 2008 than was eliminated in all of 2007."

"The fourth quarter is the first in which we were able to see the effects of the mounting economic insecurity that picked up steam in the fall of last year," he added. "People without jobs, or fearing job loss, typically don't buy homes, no matter how low prices or mortgage rates might be. Public policy, in terms of both job creation and efforts to stem the tide of foreclosures, will have a large influence on when some of these markets find bottom."

Despite the bad news across much of the country, 21 of 161 markets are not feeling the pinch of declining home values. Home values in the Pittsburgh MSA were flat in 2008. In the Fayetteville, North Carolina MSA, home values increased 6.9 percent in 2008, and The Yakima, Washington MSA was not far behind, with home values increasing 6.2 percent during the year. Other areas in New York, the Midwest and the South continued to experience steady or increasing home values.