Housing Prices Fall
Across the U.S.

U.S. home prices were falling in every region of the country in September, according to a closely watched index of home prices released Tuesday.

Home prices fell in September in all 20 major cities covered by the Case-Shiller price index, even in cities that had been holding up before the August freeze in mortgage markets, Standard & Poor's reported.

"There is no real positive news in today's data," said Robert Shiller, chief economist at MacroMarkets LLC, and the co-developer of the index.

For the national Case-Shiller home price index, prices fell 1.7% in the third quarter compared with the second quarter, and were down a record 4.5% in the past year. It was the largest quarter-to-quarter price decline in the 20 years covered by the index.

For the first time in this housing cycle prices in all 20 cities dropped from the previous month, with the biggest declines in the bubble cities of Miami, Phoenix, San Diego, Las Vegas, Los Angeles and Tampa.

For the 20 cities, prices fell a record 4.9% year-over-year. Meanwhile, prices were down 5.5% year-over-year in the original 10-city index, the largest drop in the 10-city index since 1991.

The last time prices fell so much, it took more than eight years for home prices to return to their peak level.

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.

Falling prices make it more difficult for homeowners to tap the equity in their homes or refinance their mortgages. Millions of homeowners who took out adjustable-rate loans in 2005 and 2006 face sharply higher mortgage payments this year and next, with foreclosures having already soared as the result of payment resets.

"With supply overhang growing and mortgage financing tougher to obtain, home prices are going to soften considerably further in the quarters ahead," wrote Joshua Shapiro, chief economist for MFR.

Plunging home prices will also be felt on Wall Street, where banks and other money managers have leveraged untold billions in complex securities based on increasingly risky mortgages.

Boom goes bust

Former boom towns in Florida and Southern California have now passed Detroit for the dubious honor of having the largest declines in the past year. Prices are still up in the Pacific Northwest and in areas of the South, but they're rising at a slower pace.

Fifteen of the 20 cities tracked in the index have seen prices fall in the past year, led by Tampa, Fla., with an 11.1% decline, followed by Miami with a 10% loss and Detroit with a 9.3% loss. Indeed, eight of the 20 cities recorded their largest-ever year-over-year price declines in September.

On a year-over-year basis, prices were up in five cities, led by Seattle and Charlotte, N.C., with 4.7% increases. After adjusting for inflation of 3.7% in the past year, real prices were up in just two of 20 cities.

Here are the year-over-year nominal price changes for the 20 cities covered by the index:

Tampa, down 11.1%; Miami, down 10%; Detroit, down 9.6%: San Diego, down 9.6%; Las Vegas, down 9%; Phoenix, Ariz., down 8.8%; Los Angeles, down 7%; Washington, D.C., down 6.6%; San Francisco, down 4.6%; Minneapolis, down 4.5%; Cleveland, down 4%; New York, down 3.6%; Boston, down 3.2%; Chicago, down 2.5%; Denver, Colo., down 0.9%; Dallas, up 0.2%; Atlanta, up 0.4%; Portland, Ore., up 2.2%; Charlotte, up 4.7%; and Seattle, up 4.7%.

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