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New drop in home prices hits some cities; High unemployment, rising foreclosures worsen housing crisis

A second wave of falling home prices is battering some cities that had escaped the worst of the housing market bust.

Prices in Seattle; Charlotte, N.C.; and Portland, Ore., have hit their lowest points since peaking in 2006 and 2007. Denver and Minneapolis are nearing new lows. High unemployment and rising foreclosures are taking a toll even on markets that never overheated during the boom years.

Home values are dwindling in nearly every American market. Prices fell in November in all but one of the 20 cities in the Standard & Poor's/Case-Shiller index released Tuesday. Eight of those markets hit their lowest point since the housing bubble burst.

The damage from the real estate bubble has spread well beyond Las Vegas, Phoenix and Miami, which built frantically during the mid-2000s, and is sapping prices from coast to coast. In many places, prices are expected to keep falling for at least the next six months.

But the Buffalo Niagara region is bucking the national trend, as it has largely avoided the real estate meltdown caused by speculation fueled by easy credit.

The average sales price for November rose 9 percent from $125,427 a year earlier to $136,866, a record for the month but down 4 percent from $142,269 in October. The median price rose 3 percent from $112,500 a year earlier to $116,000, also a record for the month, but down 6 percent from $124,000 in October. Median means half the sales were higher and half were lower.

In Charlotte, homes are going for 2004 prices. Last year, more than half of the homes sold in surrounding Mecklenberg County were foreclosures, says Mark Vitner, a senior economist with Wells Fargo.

"There's a huge oversupply, and a lot of people are struggling," said Vitner, who works in Charlotte. "We're expecting it to fall even further in 2011."

The banking industry, which helped Charlotte boom over the past two decades and accounts for roughly one in every 11 jobs there, was hit hard during the recession. The city lost 12 percent of its financial jobs in 2008 and 2009, according to the Labor Department.

Of course, while foreclosures weaken resale values, they're great for renters who want to own a home. Robert Hubbard closed Monday on a three-bedroom, two-bath house in Charlotte that he bought for about $79,000. While it takes some looking to find the right place, the market is "saturated" with foreclosures, he says.

In Seattle and Portland, the two largest cities in the Pacific Northwest, prices peaked in the summer of 2007 and have fallen back to 2005 levels.

Foreclosures were uncommon in Seattle until about a year ago. Now they're dragging prices down, says Jim Conlan, branch manager for Century 21 North Homes Realty Inc. Home prices in Seattle were down nearly 5 percent in November from a year earlier.

"They're the anchor on the market here that's keeping it from starting to appreciate," Conlan said.

The region's economy grew rapidly from 2002 to 2007 as Boeing rebounded from the post- 9/1 1 drop in aircraft production and tech companies recovered from the dot-com bust. The region expanded at a faster clip than the rest of the country, attracting more people and lifting home prices.

"We had a bubble thing going on like everyone else," said Dick Conway, an economic consultant based in the city.

The region was damaged by the recession. One in every three construction jobs vanished. Washington Mutual, the nation's largest thrift, collapsed and took 3,500 jobs with it. Seattle unemployment jumped to 9.1 percent in November from 4.1 percent in December 2007, when the recession began.

And while Seattle's two biggest employers, Boeing and Microsoft, haven't laid off many workers, they won't need as many new people as the economy improves, Conway says.

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