S&P Shriller Home Price Index Reports 8.4 Percent Home Price Drop

Today S&P Case-Shriller Home Price Index, which reports US home prices in 10 major metropolitan areas, fell a record 8.4 percent for 2007 through November.

This number is significantly worse than the previous calculation through October of 6.7 percent. It is also much higher than the 7.1 percent that most economists predicted.

The index “confirms our outlook that the housing shock is by no means over,” said Michelle Meyer, an economist at Lehman Brothers in New York. “Home prices are falling in response to weak demand, which is a function of buyer sentiment and tight credit conditions.”

The drop also marks 11 consecutive months of home prices dropping in major cities across the US. Falling U.S. home prices in the past year have fueled rising delinquencies and foreclosures, with homeowners unable to get out of costly loans. Banks and investors, throttled by losses in risky mortgages, have sharply curtailed financing for all but the most credit-worthy borrowers.

A surprise cut in the Federal Reserve’s target interest rate last week and another probable one on Wednesday is one ray of hope for the housing market by pulling down most mortgage rates, economists said. The Fed, in cutting its federal funds rate by 0.75 percentage point, cited concerns of deteriorating financial markets and reduced credit for homeowners.

To read more about US 10-city home price drop a record in Nov head on over to Reuters.