The plunge in the price of homes gets worse Rapid decline in 20 U.S. cities - biggest recorded yearly slide

**FILE** In this April 30, 2008 file photo, a "Reduced Price" is posted at a home for sale in Palo Alto, Calif. Shares of Freddie Mac plummeted Friday, July 11, 2008, as Wall Street and Washington became more convinced that the government is likely to bail out the nation's key mortgage financiers. (AP Photo/Paul Sakuma, file) less **FILE** In this April 30, 2008 file photo, a "Reduced Price" is posted at a home for sale in Palo Alto, Calif. Shares of Freddie Mac plummeted Friday, July 11, 2008, as Wall Street and Washington became more ... more Photo: Paul Sakuma, AP Photo: Paul Sakuma, AP Image 1 of / 4 Caption Close The plunge in the price of homes gets worse 1 / 4 Back to Gallery

Home prices across the nation tumbled faster than ever in May, according to a closely watched report released Tuesday.

A 10-city composite index plummeted a record 16.9 percent compared with a year ago, while a 20-city index fell a record 15.8 percent, according to S&P/Case-Shiller. Every one of 20 metropolitan regions being tracked posted annual declines, half of them in double digits.

"Prices are still dropping, dropping everywhere and at record rates," said Patrick Newport, U.S. economist with consulting firm Global Insight in Lexington, Mass. "I would say what's happening is a freefall."

In the San Francisco metropolitan area - which Case-Shiller defines as the counties of Alameda, Contra Costa, Marin, San Francisco and San Mateo - prices fell 22.9 percent in May compared with a year ago. That made the area the sixth worst-performing region in the country, according to the index, after Las Vegas (down 28.4 percent), Miami (down 28.3 percent), Phoenix (down 26.5 percent), Los Angeles (down 24.5 percent) and San Diego (down 23.2 percent).

However, San Francisco area prices are still up 62.7 percent compared with where they stood in January 2000.

"On a relative total performance basis, San Francisco is still a market that grew quite a lot from the mid-1990s to 2006; its prices increased very sharply during that time," said Maureen Maitland, vice president of index services at Standard & Poor's in New York, which publishes the index. "I don't want to undermine the fact that ... San Francisco is not doing well; prices are in sharp decline, but most people who owned a home for five, 10 or 15 years are still in relatively good shape if they want to sell their home today - they just can't sell it for (as much) as last year."

Overall, S&P said, the steepest declines were in markets that had the biggest run-up during the real estate boom.

Case-Shiller, which has been doing its study for about 20 years, is a repeat index: It measures price changes of the same houses as they are resold. Unlike reports on median prices, it is not skewed by changes in the type of homes sold.

However, because an increasing portion of homes sold nowadays are bank-owned foreclosures - which are often discounted - some observers have said that Case-Shiller overemphasizes the market's downside.

Maitland disputed that criticism. "Our index is supposed to measure the market," she said. "If the market happens to be a high-foreclosure market, yes, perhaps the declines are steep, but that's what's going on in the market."

On a month-to-month basis, the 10-city index was down 1 percent from April to May, while the 20-city index was down 0.9 percent. The San Francisco area fell 1.2 percent for the month, a slower decline than the 5 percent decline it clocked from January to February.

In one potential spot of good news, prices in seven regions - Atlanta; Boston; Charlotte, N.C.; Dallas; Denver; Minneapolis; and Portland, Ore. - edged up about 1 percent or less for the month.

S&P cautioned that the normal seasonal uptick in sales may have influenced the slight gains.

"The (monthly) rate of decline is slowing; everyone will keep an eye on it," Maitland said. "Whether it's due to seasonal fluctuation or the beginning of a slowdown (in depreciation), then a turnaround, I can't forecast."

But others are willing to make predictions. Newport said he thinks the market won't bottom out until around fall 2009, and he wouldn't be surprised to see the Case-Shiller numbers drop another 15 or 20 percent.

Joel Naroff, president and chief economist at Naroff Economic Advisors in Holland, Pa., said he thinks some markets will see a 40 percent decline from their peak to trough, when all is said and done. "If you think the bottom in home prices is anywhere near, think again," he wrote in a commentary.

Still, he added, the price declines may carry the seeds of a solution. "Eventually, people will start realizing that there are good deals out there and sales could bottom, if not start improving, before year's end."

Newport from Global Insight said another telling statistic is the nation's current inventory of unsold homes. According to a report last week from the National Association of Realtors, there is an 11-month supply of homes on the market, the highest since 1985. A healthy market should have a six- or seven-month inventory, Newport said.

"As long as that inventory number is high, prices will have to continue to drop to bring the inventory down," he said.