Home prices dropped in August as market struggles to recover

Another report today from the Federal Housing Finance Agency showed home prices fell 2.4 percent in August from a year earlier. Since July, prices have risen 0.4 percent, according to FHFA.

In the S&P/Case-Shiller, five cities saw a slight monthly price improvement — Chicago, Detroit, Las Vegas, New York and Washington. 

Phoenix had the largest drop in prices, with a 1.3 percent decrease from a month earlier. 

Several cities in California — San Francisco, San Diego and Los Angeles — that previously had shown some improvement each dropped by less than 1 percent in August.

The annual growth rates for those cities are still positive, with Los Angeles at 5.4 percent, San Diego at 6.9 percent and San Francisco at 7.8 percent, down from July annual increases of 7.5 percent, 9.3 percent and 11.2 percent, respectively. 

Those California cities "had come back very fast and very strongly," Blitzer said. "Prices come down when you get a lot more foreclosures."

Market analysts, along with federal officials, are concerned that a protracted moratorium on foreclosures by some of the nation's largest banks could further depress prices if the investigations into problems with documentation paperwork aren't solved quickly. 

Home prices increased in many areas between April and July because of a federal tax credit for new homebuyers. Continued foreclosures, economic uncertainty and persistently high unemployment have pushed prices downward. 

Experts are predicting that about 5 million houses will be sold this year, similar to 2009 and coming in slightly higher than 2008, the worst showing since 1997.