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Home values are flat and appear to be stabilizing, according to real estate website, Zillow, which was better than expected considering a high level of unemployment, negative equity and fragile consumer confidence.

The company reported U.S. home values fell 0.2 percent in the third quarter. Only 26 markets saw home values rise this quarter, compared with 61 markets in the previous quarter. On a year-over-year basis home values were down 4.4 percent with the Zillow Home Value Index at $171,500.

The worst of the housing recession may be behind us, and this quarter could have been much worse given the economic headwinds and turbulence over the summer, says Zillow chief economist Stan Humphries in Zillow Real Estate Research.

Unemployment has stagnated around 9 percent this year, though it decreased to 9 percent in October from 9.1 percent in September, the Labor Department announced on Friday. Meanwhile, October’s consumer confidence was the lowest it has been since March 2009.

(Zillow)

“While we still have a ways to go in terms of home value depreciation, the pace at which home values are falling has declined considerably during the course of this year,” Humphries said. “This slower pace signals that a stabilization is on the horizon.”

National negative equity — people who owe more on their mortgages than their homes are worth — increased to 28.6 percent of all single-family homes with mortgages, from 26.8 percent in the second quarter. This quarter, home values remained flat while foreclosure rates slowed, increasing negative equity, according to Zillow.

Home prices across the country ticked up slightly in August, S&P/Case-Shiller reported on Oct. 25. But prices were still down compared with August 2010, highlighting the tough road to recovery for home prices, which have declined by a third since their peak in 2006.

Meanwhile, buyers have tried to take advantage of the lowest recorded mortgage rates in about 60 years. The 30-year fixed-rate mortgage averaged 4 percent for the week ending Nov. 3, down from the previous week when it averaged 4.10 percent. Last year at this time, the 30-year rate averaged 4.24 percent, according to Freddie Mac. The 15-year rate averaged 3.31 percent, down from the prior week when it averaged 3.38 percent. A year ago, the 15-year rate averaged 3.63 percent.

Freddie Mac reported on Monday that 82 percent of refinancing homeowners maintained the same loan amount or lowered their mortgage debt in the third quarter. Of these borrowers, 44 percent maintained about the same loan amount, and 37 percent of refinancing homeowners reduced their principal balance.

“Savvy homeowners are taking advantage of some of the lowest fixed-rates in more than 60 years to lock in interest savings,” Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement. “Fixed-rate mortgage rates hit new lows during September, with 30-year product averaging 4.11 percent and 15-year averaging 3.32 percent that month, according to our Primary Mortgage Market Survey.”