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The S&P/Case-Shiller Home Price Indices out today couldn’t be more telling of what’s going on in the housing market now -- and more importantly, where it’s headed: Prices are in free fall.

The report looks at prices in the top 20 markets in the U.S. (These, of course, are some of the markets that saw the biggest price gains). The top 10 city composite is down a record 6.7% from October 2006, the top 20 down 6.1%.

What’s interesting to me is that 11 out of the top 20 markets are actually accelerating in their price declines, and the three markets that are still in the positive -- Seattle, Portland and Charlotte -- are less positive than they’ve been year-over-year; and they're negative month-to-month.

Things are getting worse and will likely continue to get worse, until buyers find a reason to get in the game again. That could be the spring season, but unlikely. Still, prices have to fall in order to get sales going again and get the market back to normal -- where it hasn't been in the past 6 years.

David Blitzer at S&P says there is no silver lining in any of this data, and in the short term he’s absolutely right. Falling prices will only add to the foreclosure crisis, making it impossible for some folks to get out of mortgages they can’t afford, because they won’t be able to sell their homes for more than they paid.

Further, refis are out the window and any feeling of home equity is right there with it. That will continue to affect consumer confidence and spending. Just look at holiday sales: It’s no surprise to me that when folks feel less wealthy in their homes, they’re less likely to fill up all that space under the tree.

But for all of you out there who will write into the blog, yelling at me that I’m always claiming the sky is falling, well, here’s my rebuttal in advance: Prices may be down, down even farther than the nasty recession-related bust of the early 1990s, but let’s remember whence we came. During the recent housing boom, prices were up in far greater percentages than they’re down today, so if you bought your home more than three or four years ago, you likely have plenty of gains left.

Sure, it’s going to be harder to sell the house, and you won’t get what your starry eyes were seeing just a year ago, but you haven’t lost anything either. For all you recent investors, sorry, it’s all coal in your stocking.

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