U.S. home prices post record decline; Seattle bucks trend

NEW YORK — U.S. home prices fell 3.2 percent in the second quarter, the steepest rate of decline since Standard & Poor's began its nationwide housing index in 1987, the research group said today.

A separate index that covers 20 U.S. cities fell 3.5 percent in June from a year earlier, but a small group of cities in that index — including Seattle — actually bucked the trend and posted price increases in June.

The broad decline in home prices around the nation in the second quarter shows no evidence of a market recovery anytime soon, one of the architects of the index said.

MacroMarkets Chief Economist Robert Shiller said the declining residential real estate market "shows no signs of slowing down."

The report came a day after the National Association of Realtors said sales of existing homes dropped for a fifth straight month in July while the number of unsold homes shot up to a record level.

The S&P/Case-Schiller quarterly index tracks price trends among existing single-family homes across the nation compared with a year earlier.

Housing is among the economic indicators closely watched by Federal Reserve policymakers.

After five years of rapidly rising home prices, the market stalled last year, with prices holding steady or falling as sales slowed. Since then, lenders have made it more difficult for some people to get mortgages by tightening standards just as foreclosures rise and some who borrowed at adjustable rates are facing higher payments they can't meet.

Problems have spread from those with poor credit repayment histories to more creditworthy borrowers.

The Fed has taken a number of steps aimed at stabilizing the situation, and market watchers are looking for a possible cut in the Fed's target for the federal funds rate, which is the rate commercial banks charge each other for short-term loans. That rate has been kept steady at 5.25 percent for more than a year.

The Fed has its next regularly scheduled meeting Sept. 18.

Only five of the cities surveyed for S&P's 20-city index showed a year-over-year increase in prices in June. Seattle led the way with a 7.9 percent price rise, followed by Charlotte (6.8 percent) and Portland (4.5 percent). Atlanta and Dallas (1.6 percent each) rounded out the group.

Prices in Boston dropped in June at a slower rate than they did in May, continuing a trend that started at the beginning of the year. In April 2006, Boston was the first metropolitan area to show a year-over-year decline, so any turnaround there could be an early sign of recovery.

S&P said it needed more data to determine whether Boston would be the first area to improve.

Detroit led the cities with the biggest price declines, with an 11 percent drop from June of last year. Other cities with falling prices included Tampa, Fla., San Diego and Washington, D.C., which all recorded drops of at least 7 percent.

In Monday's report, the National Association of Realtors said sales of existing homes dipped by 0.2 percent in July from June to a seasonally adjusted annual rate of 5.75 million units.

The median price of a home sold last month slid to $230,200, down by 0.6 percent from the median price a year ago. It marked the 12th consecutive month that home prices have declined, a record stretch.