Natl report: The housing slump isn't over

Real estate prices could fall below the levels of April 2009. That was the lowest point since the peak in July 2006. 

Economist Patrick Newport forecasts prices will fall an additional 6 percent to 8 percent and bottom out in the third quarter of 2011. "Foreclosures have either peaked in the first quarter or are going to peak soon, but they will remain very high for several years."

Tax credits and historically low mortgage rates have failed to lift home prices so far this year. Prices fell 0.5 percent in March from February, according to the Standard & Poor's / Case-Shiller 20-city index released Tuesday. Prices in 13 of the 20 cities tracked by the index fell. Only six metro areas recorded price gains. One, Boston, came in flat.

In the first quarter of 2010, U.S. home prices fell 3.2 percent compared with the fourth quarter.

That marks six straight months of declines -- a sign that the housing market is going in reverse.

 

Weak job growth, tight credit and millions more foreclosures ahead will weigh on the home market.

Falling home prices tend to curtail consumer spending, and makes it harder for struggling borrowers to refinance into an affordable home loan.

The numbers are especially disturbing because they show that improved sales due to tax credits didn't translate into higher prices, said David M. Blitzer, Chairman of the S&P index committee.

 

Mortgage delinquencies reached a record high in the first quarter. More than 10 percent of homeowners with a mortgage missed at least one payment from January through March, the Mortgage Bankers Association said last week.

Since 2006, nearly 5 million homes have been lost to foreclosures or other distressed sales, according to Mark Zandi, chief economist at Moody's Analytics. Zandi expects 3 million more to hit the market over the next two years.  Zandi noted that 15 million homeowners still owe more than their homes are worth. And 26 million Americans are either unemployed or underemployed. The underemployed include people who have given up looking for work and part-timers who would prefer to be working full time.