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Housing market recovery slowed by falling prices in largest cities

U.S. home prices fell in most major cities for the second straight month, further evidence that the housing recovery will be bumpy and weigh on the broader economy in 2012.

The Standard & Poor's/Case-Shiller index released Tuesday showed prices dropped in October from September in 19 of the 20 cities tracked.

The decline reflects the typical fall slowdown after the peak buying season. Prices had risen modestly in April through August in at least half of the cities tracked.

Still, home prices have fallen roughly 32 percent nationwide since the housing bubble burst five years ago and are back to 2003 levels, according to the index.

Prices are even lower in hard-hit areas, such as Atlanta, Cleveland, Detroit, Phoenix and Las Vegas. Washington, New York, Los Angeles and San Diego have seen the smallest declines.

The Buffalo Niagara region is not included in the index, but prices also fell locally from September to October. According to the Buffalo Niagara Association of Realtors, the average price fell 3.6 percent to $132,205, while the median price dipped less than 1 percent to $116,700.

Home values remain depressed despite some modest progress in the housing market.

Residential construction is likely to add to U.S. economic growth in 2011, the first time that has happened in four years. That's mainly because apartments are being built almost twice as fast as two years ago -- reflecting a surge in renting and weaker home sales.

The Case-Shiller index measures prices for roughly half of all U.S. homes. Prices are compared with those in January 2000, and the index is based on a three-month moving average. The monthly data is not seasonally adjusted.

Atlanta, Detroit and Minneapolis posted the biggest monthly declines. Prices in Atlanta and Las Vegas fell to their lowest points since the housing crisis began.

Americans are reluctant to purchase a home more than two years after the recession officially ended. High unemployment and weak job growth have deterred many would-be buyers.

Some people can't qualify for loans or meet higher down payment requirements. Many with good credit and stable jobs are holding off because they fear that prices will keep falling.

News Business Reporter Jonathan D. Epstein contributed to this report.