Home prices are dropping in the nation’s largest cities
and are expected to keep falling next year, as fewer people purchase homes and
millions of foreclosures come on to the market.
The Standard & Poor’s/Case-Shiller 20-city home price
index released Tuesday fell 1.3 percent in October from September.
All cities recorded monthly price declines. The last time
that happened was in February 2009.
Atlanta recorded the largest decline. Prices there fell
2.9 percent from a month earlier. Home prices in Washington dropped 0.2 percent
in October, the second monthly decline after five straight increases.
Home prices in Dallas, Portland, Ore., Charlotte, N.C.,
Tampa, Fla. and Denver have fallen for four straight months.
The 20-city index has risen 4.4 percent from their April
2009 bottom. But it remains 29.6 percent below its July 2006 peak.
This year is on pace to finish as the worst for home
sales in more than a decade. High unemployment and tight credit have kept
people from buying homes, despite some of the lowest mortgage rates in decades.
Government tax credits gave the ailing industry a boost
this spring. But they expired in April, and in recent months, home prices have
begun to dip again.
Millions of foreclosures are forcing home prices down.
Many people are holding off on making purchases because they fear the market
hasn’t bottomed out, analysts say.
Foreclosures likely will remain high for the next two
years, said Mark Zandi, chief economist at Moody’s Analytics.
Several lenders temporarily halted action after evidence
surfaced that some used flawed foreclosure documents to take people’s homes.
Some banks have resumed foreclosures at a more measured pace.
Also, the number of homeowners who owe more than their
house is worth is expected to remain high. They are more likely to default if
they run into trouble, Zandi said. Homeowners who have equity can sell their
homes if they face a job loss, divorce, or illness that makes it impossible for
them to pay their mortgage.
And more people might be less inclined to buy now that
mortgage rates are rising again. In the last month, rates on fixed mortgages
have surged more than a half-point to near 5 percent.
Most experts expect the declines to continue through
mid-year with prices on average to lose another 5 percent to 10 percent. The
worst price drops will come from cities with a struggling economy and the
highest foreclosure rates, while those with better job growth will fare better.
Home prices have declined in 18 of the 20 cities in the