February 24, 2009 / 2:03 PM / 11 years ago

U.S. home prices drop at record pace in December: S&P

A sign advertising a home for sale at a reduced price is shown in Pacifica, California December 31, 2008. REUTERS/Robert Galbraith

NEW YORK (Reuters) - Prices of U.S. single-family homes plunged 18.5 percent in December from a year earlier as the monthly pace accelerated, according to a Standard & Poor’s/Case-Shiller home price index released on Tuesday.

The S&P/Case Shiller composite index of 20 metropolitan areas fell 2.5 percent in December from November, compared with a 2.3 percent decline in the previous period, S&P said in a statement.

“There are very few, if any, pockets of turnaround that one can see in the data,” David Blitzer, chairman of S&P’s index committee, said in the statement. “Most of the nation appears to remain on a downward path.”

In a separate index, home prices depreciated at an 18.2 percent pace in the fourth quarter from a year earlier, for the largest drop since the series began 21 years ago, it said. From the housing market peak in the second quarter of 2006, home prices have plummeted 26.7 percent, it said.

Home price depreciation is seen by many economists as a core driver of the financial crisis since many assets on bank balance sheets are tied to housing values. The government is taking steps to halt the foreclosures that are exacerbating price drops, but measures announced thus far have fostered only marginal confidence amongst economists.

President Barack Obama last week unveiled a plan to help up to five million borrowers refinance to lower cost loans, and also boost the number of mortgage modifications for homeowners headed toward foreclosure. At the current pace, the U.S. could see nearly six million new foreclosures in 2009-2012, according to Credit Suisse.

Despite government efforts, home prices may end up falling as much as 42 percent from their peak just to bring them back in line with rents, said Carl Riccadonna, senior U.S. economist at Deutsche Bank in New York. That number could be larger if unemployment continues to rise, he said.

“The government is taking bold steps to try to curb the problem with foreclosures, and I’m in favor of that, but I don’t think the plan will be successful to the point that we would change that forecast,” he said.

The S&P indexes are skewed lower by prices in some cities that saw the greatest appreciation during the housing boom. Phoenix recorded an annual decline of 34 percent, while property values in Las Vegas and San Francisco fell 33 percent and 31.2 percent, respectively, according to S&P.

Editing by James Dalgleish

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