Property valuation site Zillow says that signs of stability in the housing market are vaporizing, and U.S. home values are poised to drop another $1.7 trillion this year.

The impact varied by city, but, overall, though the year started out strong, the “green shoots” failed to take root and the dust storms of recession blew them away.

As the correction continues, unbuoyed by external intervention, Zillow sees prices bottoming out sometime in 2011. They predicted average appreciation rates to turn “sometime in the next three to five years.”

In the meantime, for borrowers who become “underwater,” or owe more on their home than it’s worth, the situation can get drastic.

Selling is an option, and if you can do it, it can be preferable to throwing money down a pit, even if you have to take a loss. Most would love to refinance, but that’s hard to do with a negative equity situation. Some homeowners have had luck with the HARP program set up by the government specifically to help underwater borrowers refinance.

Early 2010 Housing Stabilization Fizzles; U.S. Homes Set to Lose $1.7 Trillion This Year [Zillow]

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