The region's real estate market continued to outperform many other areas of the country and the nation as a whole in the third quarter, according to a study released today by Zillow.com, the real estate search engine.

The study, which covers Philadelphia, Camden and Wilmington as a single entity, said home values in the third quarter fell 5.5 percent from the same period of 2007 - slightly more than half that of the United States as a whole in the same time.

What's more, just 4.4 percent of area homes bought in the last five years were considered "under water" - meaning that more was owed on them than they could bring if they were sold today.

The national figure for homes with negative equity is 14.3 percent, reported Zillow, which is based in Seattle.

The Philadelphia area is showing more stability than most other markets, said Stan Humphries, Zillow's chief economist, even though "the area is undeniably in the midst of a correction."

With a market peak in 2007 - one full year after most of the nation's markets experienced theirs - "it could take Philadelphia longer to reach a bottom," Humphries said.

Indicators suggest that the area's value declines may stay relatively small, he said. Negative equity is much lower than in the rest of the country. The area has a "healthy five-year annualized appreciation of 6 percent," compared with 3.4 percent nationally, he said.

While many experts question Zillow's home-value estimates, some believe they are in the ballpark.

"These are very reasonable estimates for the area," said Mark Zandi, chief economist at Moody's Economy.com in West Chester.

Joel L. Naroff, TD Bank's chief economist, said, "I am not sure how they figured this, since there are so many submarkets," but, while "conditions are not great, the region hasn't been hit by major housing problems."

During the last 12 months, 30.2 percent of homes sold in the United States were done so at a loss, up from 23.7 percent at the end of the second quarter, according to Zillow.

In this region, just 9.3 percent were sold for a loss.

In 17 markets - 14 of which are in California - more than half of homes sold in the last year went for a loss.

Major home-price drops in those areas are being fueled by high numbers of foreclosure sales.

Foreclosures made up almost one in five, or 18.6 percent, of all transactions in the last 12 months nationally. Not surprising, areas with the highest foreclosure rates are the markets with some of the greatest home-value declines.

In California's Central Valley, 57.6 percent of transactions in Merced were foreclosures, and in Stockton, foreclosures made up 56.4 percent of transactions.

Put another way, one in every 60 houses in Stockton is in foreclosure; in Merced, one in every 88 is. By comparison, one in every 2,500 houses in Delaware County had a foreclosure filing in September.

There are no other comparable Zillow data available for this region, although Zandi said that, based on Equifax credit-file data, 0.87 percent of first-mortgage loans in the region were in default at the end of September, compared with 1.38 percent nationally.

With continued intervention by the state and the city, it can take a year or more for a default to go to foreclosure sale, so the number of sales, anecdotally, remains minimal.

A third-quarter study by Philadelphia economist Kevin Gillen for single-family homes in the city (condos are excluded) showed median prices down 6.8 percent.

In the same period, the composite price of houses in 10 cities tracked by Standard & Poor's Case-Shiller Index was down 20.8 percent - including Los Angeles, Las Vegas, Miami, and Washington.

Philadelphia prices are still overvalued about 2 percent, according an IHP Global Insight/National City measurement - meaning that they have that much more to fall before they reach bottom.

Gillen points out, however, that Philadelphia prices in the 1990s continued to fall for much of the decade after hitting bottom, so there are no guarantees.

Said Humphries: "It seems Philadelphia may escape the worst of the housing market woes affecting much of the rest of the country."  By Alan J. Heavens  Inquirer Real Estate Writer