House prices in 20 U.S. cities declined at the fastest pace on record in August, according to figures released Tuesday.
The S&P/Case-Shiller home-price index, a closely watched barometer of the U.S. housing market, dropped 16.6% in August from a year earlier, as forecast, after a 16.3% decline in July. The gauge has fallen every month since January of last year.
The decrease in property values, which helped boost real estate sales last month to the highest level of the year, will probably intensify in coming months as credit markets continue to tighten, which threatens to dry up mortgage financing.
Prolonged price declines may push even more houses into foreclosure, weakening consumer spending and the economy.
"There's still quite a bit further for prices to go down, even though the volume has probably bottomed out," William Cheney, the chief economist at Manulife Financial Corp.'s John Hancock Financial Services Inc., said in an interview Tuesday. "Prices will probably find a bottom sometime next year."
Home prices fell 1% in August from the prior month after declining 0.9% in July, the report showed. The figures are not adjusted for seasonal effects, so economists prefer to focus on year-over-year changes instead of month-to-month changes.
For a fifth consecutive month, all regions showed a decrease in prices in August compared with a year earlier, led by 31% declines in Phoenix and Las Vegas.
Just two markets, Cleveland and Boston, showed an increase in property values from the prior month. In July six cities showed an increase.
"The downturn in residential real estate prices continued, with very few bright spots in the data," David Blitzer, the chairman of the index committee at Standard & Poor's, said in a press release.
Robert Shiller, the chief economist at MacroMarkets LLC and a professor at Yale University, and Karl Case, an economics professor at Wellesley College, created the home-price index using research from the 1980s.
Some reports this month indicated that falling prices have spurred consumers to make purchases.
New and previously owned houses sold at a combined annual pace of 5.644 million in September, the most since November of last year, according to figures from the Commerce Department and National Association of Realtors.
Sales of distressed properties accounted for 35% to 40% of last month's total, the agents' group said.
The median price of an existing home fell 9% in September from a year earlier, according to the Realtor group. The median price of new houses fell 9.1% in September from a year earlier, the Commerce Department reported Monday.
Foreclosure filings increased 71% in the third quarter from a year earlier, according to RealtyTrac, an Irvine, Calif., seller of foreclosure data. It said 765,558 U.S. properties got a default notice, were warned of a pending auction, or were foreclosed on in the quarter, the most since records began in January 2005.
Declining home construction has subtracted from growth since the first quarter of 2006. The downturn is likely to remain a drag on the economy for the next few quarters, economists said.
Ryland Group Inc., a home builder based in Calabasas, Calif., reported a wider third-quarter loss last week and said foreclosed properties are driving down the value of Ryland-built homes.
Ryland's chief executive officer, Chad Dreier, said during a conference call last week that falling home prices in many parts of the country are preventing potential buyers from selling their houses and purchasing another one.