The Case-Shiller Index is Down Again for September

In terms of housing prices, prices continue to decline with no end in sight. Text in bold is my emphasis. From Market Watch:

U.S. home prices were falling in every region of the country in September, according to a closely watched index of home prices released Tuesday.

"There is no real positive news in today's data," said Robert Shiller, chief economist at MacroMarkets LLC, and the co-developer of the index. Shiller said it's nearly impossible to forecast when the market could turn around.

For the national Case-Shiller home price index, prices fell 1.7% in the third quarter compared with the second quarter, and were down a record 4.5% in the past year. It was the largest quarter-to-quarter price decline in the 20 years covered by the index.

For the first time in this housing cycle, prices in all 20 cities dropped from the previous month, with the biggest declines in the former bubble cities of Miami, Phoenix, San Diego, Las Vegas, Los Angeles and Tampa.

For the 20 cities, prices fell a record 4.9% year-over-year. Meanwhile, prices were down 5.5% year-over-year in the original 10-city index, the largest drop in the 10-city index since 1991.

The last time prices fell so much, it took more than eight years for home prices to return to their peak level.

"We judge the recent decline in home prices to be the beginning of an extended decline," wrote Drew Matus, an economist for Lehman Bros., who said prices would probably fall 15% from peak to trough nationally.

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

Falling prices make it more difficult for homeowners to tap the equity in their homes or refinance their mortgages. Millions of homeowners who took out adjustable-rate loans in 2005 and 2006 face sharply higher mortgage payments this year and next, with foreclosures having already soared as the result of payment resets.

"It is surprising that the weaker housing market so far has had such a limited effect on U.S. household spending," wrote Gabriel Stein, an analyst for Lombard Street Research. "However, if house prices do continue to fall at their recent pace, it would be astonishing indeed if this did not badly hit consumer confidence and hence spending."

Former boom towns in Florida and Southern California have now passed Detroit for the dubious honor of having the largest price declines in the past year. Prices are still up in the Pacific Northwest and in areas of the South, but they're rising at a slower pace.