Dec. 27, 2011 -- U.S. home prices fell more than expected in October as foreclosures continue to drag down the housing market, the S&P/Case-Shiller reported Tuesday.
According to the widely-used measure index, home values in its 20-city composite fell 3.4 percent from October 2010. Prices fell 1.2 percent from September, when prices returned to 2003-levels.
David Blitzer, chairman of the Index Committee at S&P Indices, said the only good news in the October data is some improvements in the annual rates of change of 14 of 20 cities and the 10- and 20-city composites.
October's decline in Case-Shiller home prices was driven by slides in major cities, including New York, which has, over the past several years, exhibited more stable prices than many other regions, said Guy LeBas, chief fixed income strategist with Janney Capital Markets. Nineteen of the 20 cities analyzed had decreases in home prices over the month. Phoenix was the only one of the 20 areas that had a positive monthly change at 0.3 percent.
"Overall, it looks like the reprieve for home prices provided by lower mortgage rates beginning last summer has come to an end, and the supply-demand imbalance in housing is coming back into the spotlight," he said.
Mortgage rates have fallen to "record-low" levels at the end of the year. Freddie Mac, or the Federal Home Loan Mortgage Corporation, announced on Thursday that the 30-year fixed rate averaged 3.91 percent for last week, "a new all-time low," dropping below the previous week's 3.94 percent, the former record low. The 15-year fixed rate matched the previous week's "all-time record low" at 3.21 percent.
S&P/Case-Shiller reported Detroit and Washington, D.C. were the only two cities to show positive annual returns of 2.5 percent and 1.3 percent, respectively. Fourteen of the 20 metropolitan areas, the 20-city and 10-city composites saw improved annual returns compared to September's data. Miami saw no change in annual returns in October. The annual rates of Atlanta, Detroit, Las Vegas, Los Angeles and Minneapolis declined. Atlanta posted the lowest annual return at -11.7 percent.
Based on the current pace of sales and the foreclosure pipeline, Janney estimates it will take at least 15 months before the inventory of homes for sale realigns with demand.
"That means probable further home price declines are in store for 2012, though the pace will likely be in the 3 to 5 percent range in our view," LeBas said.
More than 100 economists surveyed by Zillow predicted the country will not see the end of the three-year decline in home values for at least another year. The real estate marketplace site said the market's bottom is forecasted to take place in late 2012 or early 2013.