U.S. home prices fall

Home prices fell in four out of every five U.S. cities in the third quarter, a record spurred by distressed foreclosure sales across the country

The median price of a U.S. home declined 9 percent from a year earlier and sales of properties with mortgages in default accounted for at least a third of all transactions, the Chicago-based National Association of Realtors said Tuesday. Prices fell in 120 U.S. metropolitan areas, rose in 28 and were unchanged in four, the biggest share of declines in data going back to 1979.

The financial turmoil sparked by the collapse of the U.S. subprime mortgage market has caused $666 billion of losses for U.S. banks, lenders and insurers. U.S. companies slashed 1.4 million jobs in the last six months, the biggest cut since 1975.

"Housing is front and center of the financial crisis," said Mark Zandi, chief economist at Moody’s Economy.com in West Chester, Pennsylvania. "So long as house prices are declining and foreclosures mounting, the financial system will struggle and the economy will be in recession."

The steepest price declines were all in California. The area surrounding San Bernardino had a 39 percent fall in its median home price to $227,200. Sacramento saw a 37 percent decline to $212,000, and San Diego had a 36 percent drop to $377,300. The U.S. median is $200,500.

Elmira, New York, had the biggest price increase in the U.S., with a 13 percent gain to $105,000, according to the report. Decatur, Illinois, rose 8.7 percent to $93,400, and the median price in Bloomington, Illinois, grew 8.1 percent to $168,400.

Foreclosures boosted U.S. sales of single-family houses and condominiums to 5.04 million in the third quarter at a seasonally adjusted annual rate, up 2.6 percent from the second quarter, the report said.

Record increases
U.S. foreclosure filings totaled 279,561 in October, an increase of 25 percent from a year ago, according to Irvine, California-based RealtyTrac. They include default notices, pending auctions and repossessions.

The root cause of the surge in home repossessions is the government’s "failure to deal effectively with unaffordable loans and unnecessary foreclosures," Federal Deposit Insurance Corp. Chairman Sheila Bair said Tuesday.

"Minimizing foreclosures is essential to the broader effort to stabilize global financial markets and the U.S. economy," Bair said.

The S&P/Case Shiller home price index that tracks 20 cities may tumble as much as 14 percent in 2008 and 7.8 percent in 2009, Freddie Mac, the world’s No. 2 mortgage buyer after Fannie Mae, said in a report this week. Combined sales of new and existing homes probably will fall to 4.87 million, down 35 percent from the record 7.46 million sold in 2005, McLean, Virginia-based Freddie Mac said.

Retail sales have tumbled every month since July, the longest series of declines in Commerce Department data going back to 1992. Consumer confidence fell last month to the lowest ever recorded, according to the New York-based Conference Board’s index that began in 1967.

The five largest homebuilders reported a combined $1.09 billion in losses in the most recent quarters as consumers struggled to obtain mortgages.