“The national economy is certainly the No. 1 issue for housing," said David Blitzer, chairman of the Index Committee at Standard & Poor's. "Additionally, there is a large supply of houses on the market and further, hidden, supply due to delinquent mortgages, pending foreclosures or vacant homes. New construction is running at less than half the pace needed to meet normal demand, so a sustained recovery could be a ways off.”
In September, prices fell in every metropolitan area, with the 10-city and 20-city indexes showing slight increases of 1.6 percent and 0.6 percent, respectively, the report said.
Only Washington, D.C., which increased 0.3 percent, and Las Vegas, up 0.1 percent, showed increases in September. Cleveland (3 percent) and Minneapolis (2.1 percent) led the cities with declining prices.
There were about 4 million homes on the market in October, which would take 10.5 months to sell the inventory, according to the National Association of Realtors (NAR). In a healthy market there are about six months' worth of houses for sale.
Sales of previously occupied homes decreased 2.2 percent in October, NAR said last week.
“People are still fearful of jumping into housing again despite low interest rates," said Anthony Sanders, a real estate finance professor at George Mason University. "They are still not sure what is going to happen with taxes in January and they don’t want to commit.”
With prices on the decline, the housing market is expected to struggle in the long term.
“We can’t expect any good news soon," Sanders said. "Last week, Fannie and Freddie lifted freezes on foreclosures with certain lenders, meaning even more foreclosed homes will entering the already overstocked inventory. Combine that with today’s low numbers, and it’s certain to stay pretty grim for at least the next few years, possibly many more.”