By Rex Nutting, MarketWatch WASHINGTON (MarketWatch)-- Home prices in 20 major U.S. cities dropped 1% in August compared with July and had fallen a record 16.6% from the previous year, according to the Case-Shiller home price index published Tuesday by Standard & Poor's. Prices have fallen 27.3% from their peak in June 2006. Prices have fallen in all 20 cities compared with a year ago. In the past year, Phoenix and Las Vegas have had the largest declines, down nearly 31% in both cities. Prices had fallen the least in Dallas (down 2.7%) and in Charlotte (down 2.8%). Prices fell more than 20% in six cities. "The downturn in residential real estate prices continued, with very few bright spots in the data," said David Blitzer, chairman of the index committee at S&P. Only two of the 20 cities showed price gains in August: Cleveland (up 1.1%) and Boston (up 0.1%). Prices have risen in Boston for five months ago. Prices were flat in Chicago and Denver in August. The largest declines in August were found in the San Francisco metro area, where prices fell 3.5%. For the original 10-city index, prices fell a record 17.7% in the previous 12 months. Home prices surged in 2003 through 2006, climbing by a cumulative 52%, according to Case-Shiller. Since then, however, homeowners have given up half of the gains from earlier in the decade as the housing and credit bubbles burst. Falling prices have eroded Americans' wealth, cutting into their ability to borrow against the equity in their homes or refinance their mortgages or sell for a profit. Millions of Americans now owe more on their homes than they're worth. The falling home values could also trigger higher monthly payments for many homeowners with negative-amortization loans. The sharp drop in home prices have also led to massive losses in major banks, which bet heavily that home prices could never fall. But falling prices are likely a necessary ingredient if the housing market's to work out its excesses and begin growing again.

Source