Falling demand for housing since the federal tax credit ended in June took a bite out of prices in the third quarter, and experts say those declines will continue.
Two price indicators - the Case-Shiller Index and the Freddie Mac Conventional Home Price Index - show declines in the third quarter of this year from the second.
The indicators diverge on year-over-year measures, with Case-Shiller's showing a 1.6 percent increase, while Freddie Mac's had a 3.1 percent decrease over the third quarter of 2009.
Case-Shiller tracks prices in 20 cities; Freddie Mac follows nine census divisions.
No matter which measure you follow, the outlook is generally not good.
"Housing demand fell off a cliff after the second tax credit expired," said IHS Global Insight economist Patrick Newport, adding that this was now showing up in broad-based declines in prices.
In June, prices rose in 18 of the 20 cities tracked by Case-Shiller. Three months later, prices dropped in 18 cities.
"Going forward, weak demand, foreclosures, and a glut of homes for sale," Newport said, "should translate into another 5 [percent] to 10 percent drop in the Case-Shiller aggregate indexes."
Although Philadelphia isn't part of the Case-Shiller survey, Pennsylvania, New Jersey, and New York make up the Middle Atlantic census division that Freddie Mac covers.
Over the last 12 months, home values decreased 0.6 percent in the Mid-Atlantic. Over the last five years, values increased a total of 1.9 percent.
Amy Crew Cutts, Freddie Mac's deputy chief economist, said distressed sales, including foreclosed properties and short sales, were still a big part of the market.
"The past three quarters, we've seen encouraging numbers in delinquency trends, although the delinquency rates remain high," Cutts said, adding that Freddie Mac's forecast was for economic conditions to continue to improve.
This should lower delinquency rates further over the coming year and relieve some of the downward pressure on home prices, she said.
One variable is foreclosures that have been delayed by questions that arose in September over processing.
If the issue is unresolved over the next 30 days, a full three months with fewer lower-cost foreclosures might mitigate price declines. If problems are resolved, the flood of foreclosure sales might depress prices further.
Foreclosure rates rose in the Philadelphia area in September, according to CoreLogic, of Santa Ana, Calif., to 2.14 percent from 1.65 percent. The national rate was 3.29 percent in September.
Contact real estate writer Alan J. Heavens at 215-854-2472 or firstname.lastname@example.org.