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U.S. Home Prices Take Record Plunge

U.S. home prices sank by the sharpest annual rate on record in January, and the pace continues to accelerate, but there were a handful battered metro areas where price declines slowed, according to data released Tuesday.

The Standard & Poor's/Case-Shiller index of home prices in 20 major cities tumbled by a record 19 percent from January 2008. It was the largest decline since the index started in 2000. The 10-city index dropped 19.4 percent, also a new record.

All 20 cities in the report showed monthly and annual price declines, with 13 posting new annual records. Prices dropped by more than 10 percent in 14 cities.

"There are very few bright spots that one can see in the data," David Blitzer, chairman of S&P's index committee, said in a prepared statement. "Most of the nation appears to remain on a downward path."

But in Cleveland, Los Angeles, Las Vegas and Washington D.C. - areas all ravaged by foreclosures - annual price declines eased.

Six cities, including Minneapolis, Charlotte, Seattle and New York, showed smaller price declines in January compared to December.

Faring the best were Dallas, Denver and Cleveland with annual price declines around 5 percent in January.

The drop in prices has contributed to a modest increase in sales. The Commerce Department reported last week that new home sales rebounded unexpectedly last month, but were still the second-worst on record and remained well below last year's levels.

Sales rose 4.7 percent in February to a seasonally adjusted annual rate of 337,000 from an upwardly revised January figure of 322,000. Even after the revision to January's sales results, the month remained the worst on records dating back to 1963.

Economists surveyed by Thomson Reuters had expected February sales to fall to a pace of 300,000 units.

"Low mortgage rates coupled with the decline in home prices is putting a lot of affordability at the disposal of prospective homebuyers," Greg McBride, senior financial analyst at, told CBS News.

Also last week, the National Association of Realtors said sales of previously occupied homes unexpectedly jumped in February by the largest amount in nearly six years as first-time buyers took advantage of deep discounts on foreclosures and other distressed properties, the National Association of Realtors said last week. Some economists say that could help moderate declines.

"We still think there is a good chance the rate of (price) decline will slow through the spring as existing home sales stabilize and perhaps pick up a bit, but foreclosures are weighing heavily on prices," wrote Ian Shepherdson, chief U.S. economist at High Frequency Economics.

Prices in the 20-city index have plummeted 29 percent from their peak in summer 2006, while the 10-city index has fallen 30 percent. Prices have sunk back to levels not seen since late 2003.

To provide some relief, Congress in February passed a new $8,000 tax credit for first-time homebuyers and President Barack Obama is directing $75 billion to a new foreclosure prevention plan.

But the success of those efforts could well depend on how far the U.S. economy falls. While sales are showing some signs of stabilization, some economists expect prices to keep falling for the rest of this year - and maybe even longer.

"We continue to believe that it is unlikely that we are anywhere near a bottom in nationwide home prices," wrote Joshua Shapiro, chief economist at MFR Inc.