More than 40 percent of single-family-home owners in the Tucson area owed more on their mortgages than their homes' value at the end of March, real estate tracking firm reported Monday.

Home values continued to drop as foreclosures drove down prices, and more than one in four Tucson-area homes sold in March went for a loss, the firm reported.

The Zillow home-value index for the Tucson area was $157,300, a 9.4 percent year-over-year drop. Zillow's index is a midpoint market valuation of homes in a certain area.

At the end of the first quarter, 43 percent of single-family-home owners with mortgages in the Tucson area were "underwater," which means they owed more than their homes were worth. That's up from 39 percent negative equity in the fourth quarter of 2009.

Nationally, 23.3 percent of single-family homes with mortgages were underwater, Seattle-based reported.

"It can be quite toxic to housing markets, particularly in the presence of high unemployment," Stan Humphries, Zillow's chief economist, said about the impact of high negative equity.

A family that experiences a financial crisis such as a job loss can survive it better if its home has positive equity, Humphries said. But when homeowners owe more than their houses' value, they're more likely to default on the mortgages.

"High negative equity will continue to spawn more foreclosures," Humphries said.

The home values reported Monday largely agree with other Southern Arizona housing reports. The Tucson Association of Realtors pegged the median price for a home at $157,680 for March. Local housing tracker John L. Strobeck reported a median price of a resale home at $154,900 and the median price for a new home at $178,865 in his monthly report for March.

Still, some real estate agents are cautious when it comes to Zillow's numbers, said Dan Santa Maria, president of the Tucson Association of Realtors Multiple Listing Service.

"They throw everything in a pot and mix it, and then come out with a number," Santa Maria said.

Humphries said Zillow's numbers are accurate because the values consider all homes - even ones that aren't on the market or haven't been sold.

Nationally, Zillow reported home values in most markets continued to decline in the first quarter of this year, with a 3.8 percent year-over-year drop to $183,700. But home values in several large California markets - some of the hardest hit in the housing crisis - show signs of having reached a bottom. Values in Los Angeles, San Diego and San Francisco have stabilized significantly in the past year, reported.

Home values in the Tucson market, while they haven't stabilized, are not decreasing as quickly as they once were, Humphries said. The year-over-year drop in Zillow's value index peaked in January of 2009 at more than 13 percent, Humphries said. Tucson's recent decrease of more than 9 percent wasn't quite as severe.

In contrast, those housing markets in California have had no decreases in value for at least 10 months, Humphries said.

"We've not yet seen that in Tucson or Phoenix," Humphries said.

The market in the Phoenix area has fared worse through the housing crunch than Tucson's.

Zillow reported that home values there dropped nearly 14 percent to $141,000, that 64 percent of single-family-home owners were underwater, and that foreclosures made up 46.5 percent of all home sales.

Strobeck, who runs Bright Future Business Consultants, said that while Tucson may be feeling some impacts from the larger city to the north, Tucson and Phoenix are primarily separate markets.

The Phoenix area had more of the risky loans that prompted the housing collapse, and the climb in values was steeper there, he said.

"Right now, values in Tucson are higher than values in Phoenix, which used to not be the case at all," he said.

Strobeck said he's seen housing prices in Tucson begin to stabilize over the past four or five months, but he believes it's going to take years for prices to really start going up again.

"We're on the bottom, or bouncing along the bottom," Strobeck said. "But the bottom is going to be very wide."

Contact reporter Dale Quinn at 573-4197 or