The value of U.S. homes fell by 12.1 percent in the second quarter from a year earlier, but the rate of decline shrank for the first time since prices began to fall in 2007, real estate website Zillow.com said on Tuesday.

Even so, stabilization of the hard-hit housing market, which is seen as key to an economic recovery in the United States, is not yet in view, with mounting foreclosures and a high level of “underwater” mortgages still posing threats, Zillow said.

U.S. home values posted their 10th consecutive quarterly decline, falling to $186,500 on the Zillow Home Value Index, according to the second-quarter Zillow Real Estate Market Reports.

The report encompass 161 metropolitan areas and covers value changes in all homes, not just those that have recently sold.

Home values in the first quarter had fallen by 12.4 percent from the prior-year period.

But distress signals tracked by Zillow remain high, suggesting that for most U.S. metropolitan areas housing prices have not yet hit bottom.

“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,” Stan Humphries, Zillow’s chief economist, said in a statement.

Source/Full Story: Reuters

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