NEW YORK U.S. home prices dropped 8.9 percent in the final quarter of 2007 compared with a year ago, Standard & Poor's said Tuesday, the steepest decline in the 20-year history of its housing index.
"We reached a somber year-end for the housing market in 2007," said one of the index's creators Robert Shiller. "Home prices across the nation and in most metro areas are significantly lower than where they were a year ago. Wherever you look, things look bleak."
The S&P/Case-Shiller home price indices, which include a quarterly index, a 20-city index and a 10-city index, reflect year-over-year declines in 17 metropolitan areas with double-digit declines in eight of them.
The 10-city index also set a record annual decline of 9.8 percent in December, while the 20-city index dropped 9.1 percent.
Home prices also plunged 5.4 percent from the previous three-month period, by far the largest quarter-to-quarter decline in the index's history. The previous record was the revised 1.8 percent drop in the third quarter of 2007.
The quarterly index tracks prices of existing-family homes nationwide compared with a year earlier.
A government report Tuesday said U.S. home prices posted their first annual decline in 16 years. The Office of Federal Housing Enterprise Oversight said nationwide prices dipped 0.3 percent in the fourth quarter from the year-ago period.
The OFHEO index is narrower in scope and is calculated using mortgages of $417,000 or less that are bought or backed by Fannie Mae or Freddie Mac. That excludes properties bought with some of the riskier types of home loans.
"It will only get worse. This record will be shattered by subsequent declines," said Peter Schiff, author of "Crash Proof: How to Profit from the Coming Economic Collapse" about the S&P/Case-Shiller report. "We will experience the most substantial decline in history because before this we had experienced the most unprecedented rise in U.S. real estate history."
After 14 years of rising prices, the housing market is unwinding, taking victims from Main Street to Wall Street. Homeowners are losing their houses to foreclosures at an increasingly rapid rate as interest rates on home loans adjust higher and declining values eat into equity.
Irvine, Calif.-based RealtyTrac Inc. said Tuesday that the number of homes facing foreclosure climbed 57 percent in January from the previous year and more lenders are being forced to take possession of homes they couldn't dump at auctions.
Investors are taking huge losses to rewrite the declining value of securities backed by mortgages. Bond insurers also are taking a hit and could have trouble paying back bond holders if default levels soar. Stalled by swelling inventories and weak demand, homebuilders have been recording record losses quarter after quarter.
Economists worry the housing slump will plunge the broader economy into a recession. The economy grew an anemic 0.6 percent in the fourth quarter.
Earlier this month, Congress passed a $168 billion rescue package with provisions aimed to help beleaguered homeowners refinance into more affordable loans. The Federal Reserve also has aggressively slashed interest rates to spur growth.
The S&P/Case-Shiller index showed the Miami market was the weakest surveyed, posting a 17.5 percent annual decline. Las Vegas and Phoenix followed with a 15.3 percent drop each. Los Angeles, San Diego, San Francisco, Detroit and Tampa, Fla., all recorded double-digit annual declines.
Only three metro areas Charlotte, N.C., Portland, Ore., and Seattle showed year-over-year increases in prices, but Seattle's growth was up a slim 0.5 percent.
On Monday, the National Association of Realtors said sales of existing homes in January fell to the lowest level in nearly a decade while the median price for a home slid for the fifth straight month. The Commerce Department is set to report on January's new home sales Wednesday.