House prices suffer worst fall in index history

Aug 28, 2007 - An index measuring U.S. house prices suffered its worst decline since its creation 20 years ago, and there is no sign of a bottom for the market, according to a report compiled by Standard and Poor's and economist Robert Shiller.

The S&P/Case-Shiller U.S. National Home Price Index fell 3.2 percent to 183.89 last quarter from the same period in 2006, its sharpest decline in the index's history dating back to 1987, S&P said in a statement. The pace of decline accelerated from 1.6 percent in the first quarter.

"The pullback in the U.S. residential real estate market is showing no signs of slowing down," Shiller, the creator of the index and chief economist at MacroMarkets LLC in Madison, New Jersey, said in the statement.

The report adds to recent indications that the housing slump that began in late 2005 may worsen.

On Monday, the National Association of Realtors said inventories of homes rose 5.1 percent in July, boosting the overhang of supply that tends to put downward pressure on prices. Reports this week on subprime mortgage securities show delinquencies on loans backing the bonds continued to rise in August.

Falling house prices are fueling concern that the economy may head toward recession as homeowners with little equity in their properties are unable to refinance adjustable-rate loans at better terms before monthly payments rise.

At the same time, lending in the past two months has been restricted to even "prime" borrowers, suggesting housing data will soften in the months ahead, economists said. Two-thirds of the nation's home builders said tighter underwriting standards have hurt business in the past month, up from a third in March, according to a National Association of Home Builders poll.