This year alone U.S. homes are projected to lose $1.7 trillion in value.  Since the market peaked in 2006 there has been over $9 trillion in lost equity, according to Zillow.  But let’s put that in perspective.

Zillow cites a report by the Congressional Research Service, which says that from 2001 to the end of September of this year, the war in Iraq has cost the U.S. $750.8 billion.  This means that since 2006, the dollar value of home equity lost by U.S. homeowners is greater than the cost of 12 Iraq wars!

Now some might argue that home equity in 2006 wasn’t “real” money, and that inflated prices only created the illusion of equity.  Well, most of the country based many financial decisions on that illusion and by the end of the 3rd quarter 2010; more than 23.2% of homeowners owe more than their house is worth.

Looking forward into 2011, Dr. Stan Humphries, Zillow’s chief economist, doesn’t see the market settling into a natural equilibrium of supply and demand any time soon.  “Unfortunately, with foreclosures near an all time high in late 2010, and negative equity persisting, it does not appear that the first part of 2011 will bring much relief,” he said.

One bright spot for San Diego emerged however.  Out of the 129 market areas tracked by Zillow, only one-quarter showed any increase in value in 2010, led by Boston with a spike in residential home values of $10.8 billion and San Diego metro with an increase of $10.2 billion.

The message for San Diego homeowners:  Hang-on if you can and you’re not too far underwater.  For would-be buyers:  Don’t wait!  Prices and interest rates are on the rise.