Single-family home prices in the 20 largest metropolitan areas dropped 2.8 per cent in January, according to Case-Shiller’s index of the 20 largest US cities, another sign that the housing market bottom may still be distant.

Nationwide home prices are down 19 per cent on the year, the largest fall since the index started in 2000. Home prices in the 10 largest metropolitan areas dropped 2.5 per cent in January, leaving them more than 30 per cent below their peak in mid-2006. Prices, which rose at roughly the rate of inflation over the first 13 years of the 10-city index from 1987 to 2000, grew more than 90 per cent in real terms between 2000 and the market’s peak reports the Financial Times.

Though prices were decline faster than ever, a faint glimmer of hope can be seen in the decreasing speed of the rate of decline, said Robert Shiller, co-creator of the index and professor of economics at Yale University. But, he added, “I don’t read too much into it yet.”

The price declines were widespread, with the Las Vegas, Minneapolis, Detroit, Chicago, Tampa, and San Francisco metropolitan areas all losing more than 4 per cent.

“A lot of cities are pretty much back to where they were before the bubble began, some cities, like Detroit, are below it,” said Shiller.

Nationwide housing prices have about another 20 per cent to fall before they stabilise, said Dean Baker, co-director of the Center for Economic and Policy Research, who has been warning of an inflated housing market since 2002.

But with home prices falling at around 2 per cent a month, he said, “I think the real question is whether they overshoot.” Some markets, including Cleveland and Detroit, may already be selling at a discount, he said.

Other housing price indices have been showing glimmers of hope for home price stability. The National Association of Realtors’ initial estimates of home prices in February showed prices remained virtually unchanged from January to February, after falling 15.5 per cent on the year. According to the Office of Federal Housing Enterprise Oversight, which tracks purchase prices of houses with conforming loans, home prices rose 1.7 per cent from December to January but the increase was due largely to a change in the geographic mix of the sales.

“The last thing to turn will be the 10-city index,” which contains some of the most overbuilt areas, said Mark Zandi, chief economist at Moody’s Economy.com, who estimates home prices will fall another 10-15 per cent before stabilising.

He said prices were unlikely to fall to that level before next year and risked overshooting on the downside if the White House’s efforts to mitigate foreclosures do not kick in by the end of the year, but added that was “still a risky forecast”.

Meanwhile, the Chicago Business Barometer fell to 31.4 in March from 34.2 in February to its lowest level in over 29 years, the Institute for Supply Management-Chicago said on Tuesday.   

Read more here: US housing price freefall extends into January