U.S. home values probably will have their smallest decrease in four years in 2011 after the decline in property prices slowed, Zillow Inc. said today.

The total value of the country’s housing probably fell by more than $681 billion, about 35 percent less than the $1.1 trillion lost in 2010, the Seattle-based company said in a statement today. A projected decline of $227 billion from July to the end of this month compares with $454 billion lost in the first half of the year, according to Zillow.

An increase in buyer demand is needed before property values can begin to recover, Zillow said. Low borrowing costs may be helping, with sales of existing homes rising in November to a 10-month high, according to a National Association of Realtors report yesterday.

“While homeowners suffered through another year of steep losses, the good news is that homes are losing value at a substantially slower pace as the market works its way towards the bottom,” Stan Humphries, Zillow’s chief economist, said in today’s statement.

While property values declined at a slower pace this year, an oversupply of homes for sale, low consumer confidence and an 8.6 percent unemployment rate will continue to weigh on the market and probably keep it from recovering until late next year or early 2013, Humphries said.

Ninety-two percent of markets analyzed by Zillow had home- value decreases this year, with the biggest declines in the Los Angeles, New York and Chicago metropolitan areas, in terms of total value lost, Zillow said. Values rose in nine of the 128 markets tracked, led by New Orleans, with a $3.5 billion gain, and Pittsburgh, with a $2.7 billion increase.