WASHINGTON — Home prices dropped more than forecast in October, a sign that housing will remain a weak link as the U.S. recovery accelerates into the new year.
The Standard & Poor’s/Case-Shiller index of property values fell 0.8 percent from October 2009, the biggest year-over-year decline since December 2009, the group said Tuesday in New York.
Denver home prices declined 1.8 percent compared with October 2009. They dropped 0.6 percent compared with September.
A wave of foreclosures waiting to reach the market means home prices will remain under pressure next year, representing a risk to household finances. Federal Reserve policymakers this month said “depressed” housing and high unemployment remained constraints on consumer spending, reasons why they reiterated a plan to expand record monetary stimulus.
“Supply remains huge, and we expect housing prices to remain subdued and even keep declining into next year,” Yelena Shulyatyeva, an economist at BNP Paribas in New York, said before the report.
“The double dip is almost here,” said David Blitzer, chairman of the index committee at S&P. “(Sales aren’t) giving any sense of optimism.”
The 20-city index was down 30 percent in October from its July 2006 peak.
The year-over-year gauge provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.
The Case-Shiller gauge is based on a three-month average, which means the October data were influenced by transactions in September and August.
The drop in prices represents a setback for housing after values recovered earlier this year, thanks to an $8,000 homebuyers tax credit that lifted purchases.
“The housing sector continues to be depressed,” Fed officials said in a statement after their Dec. 14 meeting, at which they said economic growth is “insufficient to bring down unemployment.”
Even so, economists in the past two weeks have boosted projections for fourth-quarter growth, reflecting a pickup in consumer spending.
