Nine consecutive quarters of declines have left eight regions - including the Modesto, Calif., Stockton, Calif. and Fort Myers, Fla. regions - with median value declines of more than 50% since those markets peaked. In 85 of the 161 markets covered in the report, the annualized change over the past five years is negative or flat.

But in an early sign of improvement, several hard-hit markets in California, like Los Angeles, San Diego and Modesto, have seen two or more consecutive quarters of smaller year-over-year declines in home values. In total, 17 markets have seen improvement for two or more quarters in year-over-year results.

In the Los Angeles metro area, for example, the Zillow Home Value Index fell 18.9% year-over-year, a smaller decline than the 20.8% and 20.7% declines seen in the third and fourth quarters of 2008, respectively. In San Diego, home values fell 18% year-over-year, after falling 19.1% and 18.9% in the third and fourth quarters of last year. Both markets have been hard-hit by the housing downturn: L.A.’s home values have fallen 33.6% since the peak of the market in the first quarter of 2006, and San Diego’s have fallen 35.4% since that market’s peak in the third quarter of 2005.