Sheila Silhavy was driving down a quiet Michigan City street this past winter when she saw a for sale sign on the house she and her son had called home before selling it in 2007.

She called the listing agent and couldn't believe the asking price: $36,000.

"That was just one-half of what I sold it for," she said.

She had her 23-year-old son call the bank. He was approved for a special fixer-upper loan for foreclosures. She then called a local Realtor friend to guide her son through the purchase. Not long after, he got the house.

"It's good for people to know this," Silhavy said during a recent afternoon spent painting and cleaning the three-bed, one-bath bungalow. "I don't think they realize the great deals that are out there."

The crash of the housing market, which generally is blamed for precipitating the Great Recession, caused a plunge in U.S. home values not seen since the 1930s. That plunge in prices has turned into a blessing for those with good credit such as Silhavy's son.

But for many looking to sell a home, the drop in prices has been a curse.

Some 11 million U.S. homeowners remain "underwater" on their mortgages, owing more than their house is worth, according to recent data from analysis firm CoreLogic. Those who are doubly unlucky — underwater and unable to meet mortgage payments — have no option but to suffer foreclosure and sometimes bankruptcy.

"Who wants to be in a home where you are paying more for it than it is worth?" said Pamela Stalling, a counselor with the Northwest Indiana Reinvestment Alliance. "Or when you sell it, you can't even get what you owe on it."

The alliance helps homeowners facing foreclosure to obtain mortgage modifications, but that effort is not always successful, Stalling said.

Although the foreclosure crisis has swept through parts of Northwest Indiana with a vengeance, the drop in home prices here was actually much less severe than in the nation as a whole.

The median selling price of single-family homes in Northwest Indiana in 2011 was 7.8 percent lower than the highs reached just before the collapse of the housing boom four years ago, according to Greater Northwest Indiana Association of Realtors data. That compares to the 20.6 percent decline in prices nationally reported by the Federal Housing Finance Agency in its same-property index.

But that doesn't mean Northwest Indiana has escaped unscathed. In local markets such as Dyer, Portage, Griffith, Hammond and Gary, price drops have been more steep than the overall region median. In Chicago's southeast suburbs, price drops have been even greater than those nationally.

The drop in home prices initially was driven by the drop-off in demand that came even before the official start of the Great Recession. As the foreclosure crisis grew more severe, those properties began to affect the prices of the perfectly good homes around them.

In communities hit hardest by the foreclosure crisis, the decline in prices has been catastrophic.

In Gary, the median selling price of a home dropped last year to $11,900 from $46,500 in 2004. The drop in Gary was matched by Calumet City, where the median price fell last year to $37,000 from $130,000 five years ago.

"The fabric of some neighborhoods is really falling apart," said Taghi Arshami, principal of the planning and environmental design firm The Arsh Group. "It's like it was hit by Katrina or Greensburg, Kan., where the tornado blew it down."

But it is not just the decline in prices that created a sense of crisis in housing markets. Contributing greatly was the expectation, based on long experience, that home values always would appreciate.

Between 1991 and the end of 2007, home prices nationally appreciated 5.5 percent annually and never fell in any single three-month period during that time, according to the Federal Housing Finance Agency's Home Price Index.

The end of that era has upended recent assumptions made by homeowners and lending institutions when it comes to home ownership, said Dean Schwanke, director of the Urban Land Institute's Center for Capital Markets and Finance.

The Center for Capital Markets and Finance recently forecast a modest uptick in home prices in 2013 and 2014. That appears to have started locally, with the median home-selling price up an average of 4.3 percent on a year-over-year basis in each of the last three months in Northwest Indiana.

"There comes a tipping point in every cycle, and that's coming due," Schwanke said.

In the early years of the housing crisis, Realtors strenuously objected to the use of median selling prices as a barometer for home values. They said those numbers were skewed by the high numbers of foreclosures and distressed properties on the market.

But not so much anymore.

"In 2008, you could stand here and say, 'Well that was a foreclosure, so you can't compare it,'" Realtor Zeke Morris said recently while standing outside a home for sale in South Holland. "Now, 70 percent of the market here is foreclosures."

Realtors now are focused on clearing the backlog by selling as many distressed properties as possible, said Morris, who is also the Greater Chicago Association of Realtors' incoming president.

Realtors who once avoided anything resembling a distressed property now are versed completely in the intricacies of the foreclosure process, short sales, government rescue programs and federally backed "fix-it-up" loans.

"We are actually doing work that used to be done by neighborhood housing organizations," Morris said. "What we have to do as Realtors is be smart enough to impact this. It's a journey."