NEW YORK (CNNMoney.com) -- American homeowners will collectively lose more than $2 trillion in home value by the end of 2008, according to a report released Monday.

The real estate Web site Zillow.com calculated that home values have dropped 8.4% year-over-year during the first three quarters of 2008, compared with the same period of 2007.

Some 11.7 million Americans are now "underwater," owing more on their mortgage balances than their homes are worth.

Zillow collects home values and analyzes home price trends in 163 markets; all but 30 registered price drops over the nine months ended Sept. 30, compared with the same nine-month period of 2007.

"This year marked the acceleration of the market correction, and is likely to end with the eighth consecutive quarter of declines in home values," said Stan Humphries, Zillow's vice president of data and analytics. "Homeowners in most areas we cover are struggling with foreclosures pouring into the market, large amounts of negative equity and dropping home values."

No bottom in sight

One piece of good news is that in some, although not all, of the markets hardest hit by the downturn, such as San Francisco, San Diego and Punta Gorda, Fla., home values are not falling as steeply as they were.

Offsetting that cause for optimism, however, are growing economic problems, especially increased job losses.

"When we look for a turnaround, we look for two or three consecutive quarters [of smaller price declines]," he said. "We also want to see sales numbers pick up, inventories go down and improvements in foreclosure figures. Foreclosures really muddy the picture."

The foreclosure picture is not likely to clear up in the coming months, according to Humphries. He expects to see more foreclosed, vacant homes added to already bulging inventories, sending prices spiraling down and putting more mortgage borrowers deeper underwater.

Most of the subprime loans that will fail have already done so, but there are other toxic mortgage products whose default rates probably have not yet peaked. The number of option ARMs that fail, for instance, will continue to increase over the next few years according to Humphries. These loans allow homeowners to make minimum payments, which cause the loan principle to balloon. There are also lots of "liar loans" loans, which were issued without checking a borrower's assets or income, that are still going bad.

Zillow's home value statistics closely track the foreclosure crisis; price declines are steepest in areas that have been hit hardest by foreclosures.

The worst performing market in the nation was Stockton, Calif. The average home price there plunged 32.3% year-over-year to $210,179 in the first three quarters of 2008. Almost as bad were nearby Merced, down 31.2% to $167,282, and Modesto, was was off 30.4% to $197,368 in the same time period.

Humphries expressed surprise that these areas are still performed so poorly.

"I would have thought that they would have produced some more positive trends by now," he said, "but we are seeing no slowdown."

The best performing metropolitan area was Jacksonville N.C., where home values rose 4.9% year-over-year to $139,261 in the first three quarters of the year. Winston-Salem, N.C., also registered a gain, of 4.1% to $136,854. Anderson, S.C., prices climbed 3.5% to $101,816 and State College, Pa., went up by 3.4% to $206,995.