October home prices drop to March 2004 levels

— -- Home prices plummeted at the fastest rate on record as mounting unemployment and a rapid pace of foreclosures continued to hamper any turnaround in the beleaguered housing market.

Home values tumbled 18% in the 12 months to October, which comes after a 17.4% decline in September, according to a Tuesday report on the S&P/Case-Shiller index, which tracks home prices in 20 urban areas. Most economists expect the downturn to persist well into the New Year, creating additional pressure on the Obama Administration to take fast action to curb the housing meltdown.

"There is no question there will be added pressure on the administration," says Ira Peppercom, former deputy housing commissioner under President Bill Clinton. "Even though mortgage rates are at historic lows, it doesn't deal with the issue of access to credit."

As of October, the 10-city index slid 25% from its mid-2006 peak and the 20-city index is down 23%, according to Case-Shiller.

Cities that saw the largest month-to-month drops were led by Detroit, which dropped 4.5%, and San Francisco, which fell 4.2%. Atlanta, Charlotte, Detroit, Minneapolis, Tampa and Washington had their largest monthly declines on record. Home prices are back down to their March 2004 levels.

The continued declines are prompting concern among some housing experts who say more details about potential housing stimulus plans are needed. Home prices and sales remain sluggish even though the average rate on a 30-year fixed-rate loan has dropped to about 5.04% for the week ending Dec. 19, 2008, from as high as 6.44% for the week ending Aug. 22, according to the Mortgage Bankers Association.

"Mortgage rates are low but that hasn't translated into increased sales," says Lawrence Yun, chief economist with the National Association of Realtors. "This is bringing urgency for the Obama Administration. The economy can't recover without the housing market. We're a bit more concerned that they haven't come out with more details."

New markets are seeing double-digit declines in home prices. Annual rates of decline in Atlanta were 10.5%, 10.2% in Seattle and 10.1% Portland, showing the price drops are spreading more intensely beyond the Sun Belt.