Home prices in the U.S. fell in the third quarter by the most in at least two decades as the subprime lending crisis caused sales to slump.
Home values retreated 4.5 percent in the three months through September from the same period a year before, the most since records began in 1988, according to a report today by S&P/Case-Shiller. It followed a 3.3 percent drop in the second quarter.
Prices will probably keep sliding as foreclosures force more properties on to the market and sales weaken as mortgages become harder to get. The slump threatens to slow consumer spending as fewer homeowners will be able to afford vacations, new autos or home improvement projects.
“Many house shoppers are going to hold off until they feel that markets have stabilized, and this will tend to prolong the price declines,” Robert Dye, a senior economist at PNC Financial Services Group in Philadelphia, said before the report. “As house prices fall, consumers feel less wealthy and more restricted in their discretionary spending.”
Home prices in 20 U.S. metropolitan areas dropped 4.9 percent in the 12 months ended September, the most since S&P/Case-Shiller began compiling the index in 2001. The decline followed a 4.3 percent drop in August.
Economists forecast the 20-city gauge would decrease 4.8 percent in the quarter, according to the median of 13 estimates in a Bloomberg News survey.
U.S. home prices fell 4.5% in the year ending in the third quarter, according to the national Case-Shiller price index released by Standard & Poor’s on Tuesday. Prices fell 1.7% compared with the second quarter. It’s by far the largest price decline in the 20 years covered by the index. Prices had fallen 3.2% in the year ending in the second quarter. Prices fell in all 20 major cities in September compared with August, and were down 4.9% in the past year. Prices fell 5.5% year-over-year in the original 10-city index. The Case-Shiller index, which tracks multiple sales of the same homes, is considered by many observers to be the best gauge of national and metropolitan-area real-estate values.
From Standard and Poor’s: