âWe continue to believe that it is unlikely that we are anywhere near a bottom in nationwide home prices." - Joshua Shapiro, chief domestic economist at the research firm MFR. http://www.nytimes.com/2008/11/26/business/economy/26housing.html?em Outlook Grows More Dire for Housing Market By MICHAEL M. GRYNBAUM Published: November 25, 2008 The financial shocks of September and October appeared to dash any hopes for a quick recovery in the housing market, where the precipitous declines in sales and prices â the problems at the heart of the current credit crisis â have only worsened. Home loans, already scarce by normal standards, dried up as the impact of the Lehman Brothers collapse spiraled through the credit market. Buyers who had begun to wade back into the market were spooked by the turmoil, reversing recent improvements. Of the sales that did go through in October, nearly half were the result of a sale after a foreclosure. And sellers were forced to lower prices again, sending home values down at a record pace. Home prices across the United States declined 16.6 percent in the third quarter from the July-to-September period a year ago, according to the Case-Shiller Home Price Index, a widely watched gauge released Tuesday by Standard & Poorâs. That amounted to the biggest quarter-to-quarter decline in prices since the survey began in 1988. Prices have returned to levels not seen since 2004. âWe continue to believe that it is unlikely that we are anywhere near a bottom in nationwide home prices,â Joshua Shapiro, chief domestic economist at the research firm MFR, wrote in a message to clients. And fewer Americans are making plans to buy. Just 1.9 percent of the 5,000 households who responded to a Conference Board survey said they planned to buy a home in the next six months, the lowest reading this year and down from 2.6 percent in November 2007. Overall consumer confidence recovered slightly from October, but remained low. Sensing the increasingly dire housing market, the Federal Reserve announced a pair of programs on Tuesday aimed at helping Americans obtain the money needed to make large purchases, like a home. âThis action is being taken to reduce the cost and increase the availability of credit for the purchase of houses,â the Fed said in a statement, âwhich in turn should support housing markets and foster improved conditions in financial markets more generally.â The Fed will buy up to $600 billion in mortgage-related assets from Fannie Mae and Freddie Mac, the giant government-backed mortgage buyers. âWe expect this action will measurably improve conditions in the mortgage markets and will have beneficial effects on housing and the broader economy,â Michael Feroli, an economist at J.P. Morgan Chase, wrote in a note to clients. Prices declined in September in all 20 cities surveyed in the Case-Shiller report, with San Francisco and Phoenix suffering the biggest drops. Compared with a year ago, prices in Phoenix have dropped 31.9 percent, followed closely by Las Vegas with a 31.3 percent decline. Los Angeles, Miami, San Diego and San Francisco all had annual declines of more than 26 percent. Prices in New York have fallen 7.3 percent since September 2007. âThe turmoil in the financial markets is placing further downward pressure on a housing market already weakened by its own fundamentals,â David M. Blitzer, who oversees the index, wrote in a note. The report also suggested that conditions in the housing market were worsening after several months of more positive signs. While prices have fallen all year, they had appeared to be declining at a slower pace; that is no longer the case. âAs bad as the latest Case-Shiller numbers appear to be, they are bound to get much worse,â Patrick Newport, an economist at IHS Global Insight, wrote this morning. Case-Shiller came on the heels of another bleak report released Monday by the National Association of Realtors, which showed that sales of previously owned homes, which make up about 90 percent of the market, fell in October at the fastest annual rate in 40 years. For the housing market to improve, inventories of unsold homes will have to come down â a development that is dependent on a steep reduction in prices that could attract more buyers. Indeed, the only silver lining to the significant price declines of late is that they signal the recovery process, while painful and slow, is under way. In a separate report on Tuesday, the Commerce Department said that the economy contracted at a 0.5 percent annual rate in the third quarter, slightly more than the 0.3 percent contraction that was originally reported. The revision was in line with economistsâ expectations. Consumer spending, traditionally the engine of American economic growth, fell 3.7 percent in the third quarter, even worse than the previously reported 3.1 percent decrease.