5 Worst Housing Markets for 2013

No. 1 worst market: Chicago

Projected price change: 0.6% decline

The Windy City's housing market looks likely to take some fresh blows in 2013 -- in fact, it's the only major city where Zillow expects median home prices to fall.

"Chicago is a market that hasn't been doing great for quite a long time," Humphries says. "It's been a long housing recession there."

Although Zillow believes Chicago's median home values bottomed out a year ago and rebounded during most of 2012, the site expects prices to fall again in 2013 -- albeit not by much. Zillow forecasts the Windy City will see median values drop $941 to wrap up the year at $160,659.

Humphries attributes Chicago's negative outlook primarily to weak demand amid a glut of supply.

He says that because the metro area's home values peaked in January 2007 -- 12 to 18 months later than many U.S. cities -- local developers kept building condos well into 2006. "But then the recession set in and buyers for that new supply never materialized," Humphries says.

The economist adds that Illinois' status as a judicial-foreclosure state only increases the Chicago market's headwinds.

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