- The Washington Times - Wednesday, February 27, 2008

NEW YORK (AP) — House prices might still have a long way to fall.

Across much of the nation, home values are dropping — even those backed by solid mortgages — and banks are repossessing more every day. Most authorities say the dive won’t hit bottom for another year and only after excess home inventory is sharply reduced and credit markets improve.

More government intervention might also be needed if the free-market system doesn’t work quickly enough.

“The housing-value crisis is spreading and deepening,” said David Abromowitz, a senior fellow at the liberal Center for American Progress.

“It has gone way beyond subprime borrowers stretched too far with bad loans and now has clearly extended into the housing markets more broadly,” he said.

U.S. home prices dropped 8.9 percent in the final quarter of 2007 compared with a year ago, according to the Standard & Poor’s/Case-Shiller home price index released yesterday.

That marked the steepest decline in the index’s 20-year history.

Meanwhile, the Office of Federal Housing Enterprise Oversight (OFHEO) said yesterday that nationwide prices dipped 0.3 percent in the fourth quarter, the first annual decline in 16 years. Eleven states posted declines in value for the year, while prices in nine states appreciated more than 5 percent.

The OFHEO index is calculated using mortgages of $417,000 or less that are bought or backed by government-sponsored mortgage companies Fannie Mae or Freddie Mac. That excludes properties bought with some of the riskier types of home loans or homes in more expensive markets such as California and the Northeast.

“We reached a somber year-end for the housing market in 2007,” said Robert Shiller, one of the architects of the S&P;/Case-Shiller index.

That’s bad news for Sheila Prior and her husband, Matthew. Despite the weakness in the housing market, the couple is putting their three-bedroom home in Durham, N.C., up for sale this week. After being laid off in December from GlaxoSmithKline PLC, Mr. Prior accepted a job offer in Plymouth, Minn.

The couple, who have a 1-year-old daughter, initially wanted to list their home for $250,000. But after checking what other homes sold for in the area recently, their real-estate agent recommended $233,000 — the same price they paid for it in June 2006.

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