Record drop in home price index

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NEW YORK (CNNMoney.com) -- Housing prices in 20 major cities fell at record monthly and annual levels in January, according to a private report issued Tuesday, with prices down 2.8% from December and 19% from a year earlier.

The S&P Case-Shiller Home Price Index, a comparison of price changes recorded when homes are resold, is considered to be one of the most accurate gauges of market trends available. Its 20-city index has been down for 30 straight months.

Month-over-month home prices fell in all 20 markets during January and are now at late 2003 levels.

"There are very few bright spots that one can see in the data," said David Blitzer, chairman of the index committee at Standard and Poor's. "Most of the nation appears to remain on a downward path, with all of the 20 metro areas reporting annual declines, and nine of the MSAs (metropolitan statistical areas) falling more than 20% in the last year."

All told, prices have plunged 29.1% nationally since they peaked during the second quarter of 2006, according to Case-Shiller.

Individual metro areas have fared far worse. In Phoenix, home prices have fallen 35% year-over-year, while Las Vegas has been down 32.5%, San Francisco has been down 32.4% and Miami has fallen 29.4%.

Phoenix has lost 48.5% from its peak, the most of any metro area. Other big losses were absorbed by: Las Vegas, Miami, Phoenix, San Francisco and San Diego; each has seen home prices decline more than 40% from their peaks.

All 20 index cities were in negative territory, with Dallas being the least affected at a loss of 4.9%. Others in single-digit losses were: Denver at 5.1%, and Cleveland at 5.2%.

The latest report confirms anecdotal information that has been streaming in from around the nation, according to Mike Larson, a real estate analyst with Weiss Research.

"The pace of decline has picked up recently," he said. "Arguably, that's just what we need to drive up sales activity and reduce inventory."

The nation is grappling with historically high foreclosure rates, which add to inventories of homes for sale and drive down prices. In many markets, a large percentage of the homes changing hands are what's known as "distressed properties," meaning they are either bank repossessions or short sales, deals in which owners sell their homes for less than what they owe on their mortgages.

Much of the sales traffic is in foreclosure inventory, which may be skewing price statistics downward because distressed properties are often in poor condition.

But Larson does not expect home prices to improve anytime soon as job losses mount. "The biggest risk going forward is the health of the overall economy," he said.

There has been a string of positive housing market reports over the past few weeks, pointed out Pat Newport, an analyst with IHS Global Insight. New home sales are rebounding, existing home sales are rising and low interest rates are sending mortgage applications up.

"Those reports are not reflected in the January Case-Shiller report," he said. They won't be until at least the February statistics and even the March statistics come out.

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