Drop in Home Values May Accelerate

House prices fell by 2.2% from September to October and prices are off by 18% over the previous 12 months, according to Standard & Poor's/Case-Shiller housing price index that tracks existing home sales in 20 major metropolitan areas. "The bear market continues with home prices back to their March 2004 levels," said David Blitzer, chairman of S&P's index committee. Since the peak in house prices in mid-2006, the 20-city HPI is down 23.4% as of October 30. Over the previous 12 months, 14 of the 20 cities are reporting price declines in excess of 10%. Even Seattle and Portland are reporting annual rates of decline of 10.5% and 10.2% respectively. IHS Global Insight economist Patrick Newport expects house price declines will accelerate over the next few months. "Although prices are near equilibrium in many cities, they are likely to undershoot the equilibrium price on the way down-just as they overshot on the way up-because the number of homes on the market remains high," Mr. Newport said.