Home prices are hitting new depths in most major U.S. cities and are expected to fall further over the next six months.
In a majority of metro areas tracked by Standard & Poor's/Case-Shiller, prices have fallen to their lowest points since the housing bubble burst.
High unemployment, stricter lending rules and fears that prices will continue to fall are among the reasons why few people are buying homes. A rising number of foreclosures are also weighing down prices. And as more people get stuck in depreciating homes, housing could slow the economy.
Across the country, the housing industry is recovering unevenly. Many of the cities now setting new lows have been struggling with high unemployment, more foreclosures and, in some cases, a delayed response to the housing bust in 2006 and 2007.
Homes in more established areas _ those that had little room to build during the housing boom _ are doing a better job holding their value. Coastal cities in California and Northeast are seeing much smaller price declines. In Washington and San Diego, home prices even rose over the past year.
Still, many people who want to buy can't. Nearly 25 percent of households cannot move because they owe more on their mortgage than their home is worth, according to Capital Economics. An additional 25 percent can't qualify for a new mortgage because selling their homes would leave them with too little money for a down payment.
"We're likely to see new lows hit across most major markets at some point in 2011," said Mark Vitner, a senior economist at Wells Fargo Securities. "We're afraid of all this turning into another vicious cycle."
Housing prices in all but one of the 20 cities tracked by Standard & Poor's/Case Shiller fell in December from November. And the overall index declined for the sixth straight month. Washington was the only metro area where prices rose month to month.
Eleven of the markets hit their lowest point since the housing bubble burst in 2006 and 2007: Atlanta, Charlotte, N.C., Chicago, Detroit, Las Vegas, Miami, New York, Phoenix, Seattle, Tampa, Fla., and Portland, Ore.
The housing sector is struggling even while much of the economy is recovering slowly but steadily. The latest evidence of the divide came Tuesday when the Conference Board said its Consumer Confidence Index rose in February to its highest point in three years. The report suggested that many people are more hopeful about hiring and income gains over the next six months.
By contrast, the outlook for housing this year is dim. Construction of new homes is on pace for little more than half the million units a year that economists consider to be healthy. And the number of vacant homes is near a record high.
Some of the worst declines in home prices are in cities hit hardest by high unemployment and foreclosures. A home that sold for $250,000 in Detroit in 2000, for example, now sells for roughly $163,150, according to the housing report. The unemployment rate there was 11.1 percent.
One in 24 Detroit-area homes with a mortgage was at risk of foreclosure last year, according to foreclosure tracker RealtyTrac Inc. _ the fifth highest rate among major cities.
Homes in Las Vegas, on average, have lost more than half their value since 2006. They now sell for less than they did in 2000. The city had a record-high 14.9 percent unemployment rate in December. It also led the nation in foreclosures last year.
Three out of every four sales in southern Nevada are foreclosures or "short sales." These sales occur when a bank lets a homeowner sell a home for less than what's owed on the mortgage.
"You can see how many people's dreams just didn't make it," said Karin Wilson, a real estate agent with Century 21 in Las Vegas.
For many, the problem is getting worse. In Phoenix, about 70 percent of all homes with a mortgage were at risk of foreclosure in January, according to the Arizona Regional Multiple Listing Service.
The median home price has dropped by half since 2008, to roughly $110,000. Prices in one central Phoenix zip code have plunged 81 percent in the past three years.
In Tampa, foreclosures and short sales dominate the housing market. One in 20 households with a mortgage was at risk of foreclosure last year. Home buyers are mainly interested in distressed properties, real estate agents say.
"They all want to steal them," said Stephanie LeFew, owner of Tampa Home Buy Realty. "I had someone call me from Australia the other day wanting an inexpensive property for $20,000."
Tougher lending rules have scared away some potential home-buyers. Banks have been hesitant to extend new credit. Many are demanding that buyers put down a larger down payment. During the housing boom, people in many cases were able to buy homes with little or no money down.
In many depressed markets, a significant percentage of buyers are really investors and private equity firms looking to cash in on cheap real estate, Realtors say.
The federal government is trying to deter this practice, at least in cities hit hardest by foreclosures. In Detroit, the city is using money from the U.S. Department of Housing and Urban Development to offer suburban homes to police officers with only a $1,000 down payment.
But locals have yet to take advantage. The average home price in Detroit fell 7.5 percent in the October-December quarter, to $73,200, the lowest in the nation, according to Zillow.com.
"People don't qualify for loans anymore, and banks have continued to price homes lower and lower," said Mike Shannon, a suburban Detroit real estate agent who specializes in foreclosures.
Millions of foreclosures are also expected to flood the market this year. That will force prices still lower. For many, the big question is, when will prices bottom? Some have tried to time their purchases to buy at the bottom. It often hasn't worked.
Matthew Hartman, a 38-year-old sales manager in Chicago, thought he was getting a steal in 2009 when he bought a four-bedroom house for $395,000. He sold it last month for $370,000.
"We kind of thought that the market was toward the bottom, especially when we moved here in August of last year," he said. "We thought we got a great deal on this house."
AP Business Writer Alex Veiga in Los Angeles contributed to this report. Herron reported from New York.