U.S. house prices suffered their worst decline in at least 20 years in the second quarter, and there is no sign of a bottom for the market, according to data from Standard and Poor's and economist Robert Shiller.
The S&P/Case-Shiller U.S. National Home Price Index index fell 3.2 percent to 183.89 last quarter from the same period in 2006, its sharpest decline since the index was created in 1987, S&P said in a statement. The pace of decline accelerated from 1.6 percent in the first quarter.
"The pullback in the U.S. residential real estate market is showing no signs of slowing down," Robert Shiller, creator of the index and chief economist at MacroMarkets in Madison, New Jersey, said in the statement.
The report adds to recent indications that the housing slump that began in late 2005 may worsen. On Monday, the National Association of Realtors said inventories of homes rose 5.1 percent in July, boosting the overhang of supply that tends to put downward pressure on prices.
Falling house prices are fueling concern that the economy may head toward recession as homeowners with little equity in their properties are unable to refinance adjustable-rate loans to better terms before monthly payments rise.
At the same time, lending has been restricted to even "prime" borrowers, suggesting housing market data will be softer in the months ahead, economists said.
"Plainly, there will be worse to come when the heady cocktail of a large inventory overhang is mixed with tighter lending standards," said Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Connecticut.
Shares of home builders fell on Tuesday, sending the Dow Jones U.S. Home Construction Index down 4 percent. Among losers, Standard Pacific fell 7.4 percent to $9.20, Centex dropped 5.9 percent to $28.51 and KB Home declined 5.1 percent to $28.64.
Economists at Goldman Sachs Group, who forecast the S&P/Case-Shiller index will be down 5 percent on the year by the fourth quarter, said Tuesday's results create "downside" risks to their forecast.
"It does look like there's a bit of acceleration in the pace of decline and this comes before the credit crunch," said Andrew Tilton, an economist at Goldman Sachs in New York.
Separate S&P/Case-Shiller indexes of house prices across 10 and 20 major metropolitan areas also dropped. The Composite-20 index fell 3.5 percent in June from a year ago to 199.18, while the index measuring 10 regions slipped 4.1 percent to 217.07.
Home price declines appeared to accelerate in Florida and California cities, while weakness in Boston and Denver showed signs of improvement, Goldman Sachs economists said based on the index and seasonally-adjusted estimates. Cities showing gains inlcuded Seattle, Washington; Portland, Oregon; Dallas, Texas; Atlanta, Georgia; and Charlotte, North Carolina.