US September home prices fall faster than expected

The Standard & Poor’s/Case-Shiller composite index of 20 metropolitan areas declined 0.8 percent in September from August on a seasonally adjusted basis after falling a revised 0.5 percent in August.

Economists polled by Reuters had expected a decline of 0.3 percent.

Prices fell in 18 of the 20 cities.

“Housing is in big trouble. Excess inventories remain a big problem,” said Gary Shilling, President of A. Gary Shilling & Co., an investment research firm in Springfield, New Jersey.

Shilling expects another 20 percent drop in home prices.

“As prices go down, more people get underwater, leading people to walk away,” leading to more write-downs by the banks, Shilling said

“That will be Act II in the whole drama of the housing collapse,” Shilling said.

S&P, which publishes the indexes, also said home prices in the 20 cities index rose 0.6 percent from September 2009, slower than the 1.1 percent expected.

The term “underwater” refers to owing more on a mortgage on a home than a house is worth.