Home prices fall a record 10.7% in past year

Of 20 cities, only Charlotte, N.C. holds on to meager appreciation

By Rex Nutting, MarketWatch

Last update: 9:43 a.m. EDT March 25, 2008

WASHINGTON (MarketWatch) -- Home prices in 20 major U.S. metro areas have plunged a record 10.7% in the past year as prices continued to decelerate, Standard & Poor's said Tuesday.

The 20-city Case-Shiller home price index fell a record 2.4% in January, the 18th consecutive decline in prices. For 10 major cities, prices fell 2.3% in January and 11.4% for the past 12 months.

"No markets seem to be completely immune from the housing crisis,' said David Blitzer, chairman of the index committee at S&P.

Of the 20 cities, only Charlotte, N.C., has managed any gains in the past year, rising a meager 1.8%. For the fifth straight month, all 20 cities recorded lower prices compared with the previous month.

Home prices in 10 of the 20 cities have fallen at double-digit rates in the past year.

Falling prices have eroded Americans' wealth, cutting into their ability to borrow against their home or to sell for a profit. Millions of Americans now owe more on their home than it is worth.

Falling home values could also trigger higher monthly payments for many homeowners.

But falling prices are likely a necessary ingredient in getting the housing market growing again. Many economists expect prices to ultimately fall 20% to 30% from the peak; they are now down 12.5%.

"With supply overhang enormous and mortgage financing tougher to obtain, home prices are going to decline considerably further in the quarters ahead," wrote Joshua Shapiro, an economist for MFR.

The Case-Shiller index tracks sales of the same homes over time, so it's not influenced by the mix of homes sold in a period. However, it closely tracks only 20 cities, many of which had participated in the housing bubble earlier in the decade.

A similar index published by the Office of Federal Housing Enterprise Oversight will be released later Tuesday. The OFHEO index covers more geographic areas, but does not include nonconforming mortgages such as jumbo loans or subprime loans. The OFHEO index has fallen 1% in the 12 months ending in December.

In the Case-Shiller index in January, prices fell 5.1% in Las Vegas, Nev., and 4.1% in Phoenix, Ariz. The smallest decline was the 0.2% in Charlotte.

For the past year, the biggest price declines have been in Miami and Las Vegas, both down 19.3%. Two cities that had continued to see price increases last year -- Seattle and Portland, Ore. -- turned negative in January.