U.S. Home Prices Fall Again

As the recovery in the overall US economy was improving at the end of last year, home prices took another significant hit, according to the latest S&P / Case-Shiller index, released Tuesday. The report showed home prices fell 4.1 percent during the last three months of 2010, as compared with 2009’s final quarter. Prices were also down 1.9 percent from the previous quarter, the index showed.

Even worse news for the nation’s beleaguered housing market, a number of analysts do not believe things will get better any time soon. Robert Shiller, a Yale economist and half of the Case-Shiller team, said he thinks things will get substantially worse in 2011. “There’s a substantial risk of home prices falling another 15%, 20% or 25% more,” Shiller said.

Shiller cited a handful of reasons for his outlook, including the government’s impendingseparation from the mortgage market. Federally-controlled entities Fannie Mae and Freddie Mac currently own or guarantee about two-thirds of the nation’s home loans. And if the government phases them out, as President Obama has said multiple times is a major goal, private funding will have to fill the void, which will almost definitely increase the cost of borrowing, applying downward pressure to prices in the process.