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National 4Q housing prices dropped nearly 4 percent

Home prices nationally continued their slide in 2011, reaching their lowest levels since the start of the housing downturn in mid-2006.

Home prices nationally continued their slide in 2011, reaching their lowest levels since the start of the housing downturn in mid-2006.

Standard & Poor's Case-Shiller national composite index showed that home prices in the fourth quarter had fallen 3.8 percent from third-quarter levels and were 4 percent lower than in the last three months of 2010.

Prices reflected in both the 10-city and 20-city indexes were down 1.1 percent in December from November, and were lower year-over-year by 3.9 percent and 4 percent, respectively.

The Philadelphia region is not included in the Case-Shiller indexes, but comparable indexes for the city and this region have been created by economist Kevin Gillen, vice president of Econsult Corp. of Philadelphia.

His regional index, published Feb. 9, showed that prices for the eight-county metro area had declined 3.7 percent in the fourth quarter from the previous three-month period. In the city, single-family-home prices - excluding condos, which are considered multifamily housing - were down 2.4 percent, while prices in the suburbs were 4.1 percent lower.

From their peak in 2007, prices for houses in the city have fallen by an average of 18 percent, compared with a 22 percent decline in the suburbs, Gillen said.

The rest of the country has suffered bigger price declines, the Case-Shiller indexes show, with the national composite down 33.8 percent from its peak in mid-2006.

Nationally, home prices are back to the levels they were in late 2002.

David Blitzer, S&P's indexes committee chairman, said housing ended 2011 on a "disappointing note."

After accelerated decline between 2006 and 2009, Blitzer said, "the past two years has been a story of a housing market that has bottomed out, but not stabilized."

Until Tuesday's report, he said, it had been assumed that the "crisis lows" - an 18.9 percent drop in first-quarter 2009 was the worst - "were behind us."

"Now, it looks like neither was the case," Blitzer said. "The pickup in the economy has simply not been strong enough to keep home prices stabilized. If anything, it looks like we might have reentered a period of decline. . . ."

The picture may not be as bleak as Blitzer paints it.

Although agreeing that prices have hit a decade low, IHS Global Insight economist Patrick Newport cautioned that they are "not in free fall as they were in 2007" and that the Case-Shiller indexes are heavily weighted in favor of distressed housing.

The Federal Housing Finance Agency index, which tracks loans backed by Freddie Mac and Fannie Mae, showed stabilizing prices during the quarter, Newport said.

Still, he said, background issues - foreclosures, excess supply, and weak demand - will drive the Case-Shiller indexes down 5 percent to 10 percent before it's over.

In his report, Gillen said that for-sale inventory in the last six months of 2011 had fallen to its lowest point since January 2007. That fact, and some other leading indicators, "seems to point to the region's market being near its bottom, but not without enduring some further modest pain first."

That pain includes a separate Fiserv Case-Shiller prediction that the region's home prices will decline 1.7 percent more before hitting bottom in mid-to-late 2012, he said.