House Prices Fall at Record Pace in August

New York, NY, Oct. 28, 2008--House prices in 20 metropolitan areas declined at the fastest pace on record as foreclosures climbed before the credit crisis deepened this month.

The S&P/Case-Shiller home-price index dropped 16.6 percent in August from a year earlier, as forecast, after a 16.3 percent decline in July. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.

The decrease in property values, which helped boost sales last month to the highest level of the year, will probably intensify in coming months as the latest tightening of credit markets threatens to dry up mortgage financing. Prolonged price declines may push even more houses into foreclosure, weakening consumer spending and the economy.

Home prices decreased 1 percent in August from the prior month after declining 0.9 percent in July, the report showed. The figures aren't adjusted for seasonal effects so economists prefer to focus on year-over-year changes instead of month-to-month.

For a fifth consecutive month, all areas showed a decrease in prices in August compared with a year earlier, led by 31 percent declines in Phoenix and Las Vegas.

Just two markets, Cleveland and Boston, showed an increase in property values in August from the prior month, down from six cities in July.

Reports this month showed falling prices had spurred demand. New and previously owned houses sold at a combined 5.644 million annual pace in September, the most since November, according to calculations based on figures from the Commerce Department and National Association of Realtors.

Sales of distressed properties accounted for 35 percent to 40 percent of last month's total, the agents' group also said.

The median price of an existing home fell 9 percent in September from a year earlier, according to the Realtors. The median price of new houses fell 9.1 percent during the same period, Commerce reported yesterday.