U.S. home prices show record drop in January

U.S. home prices continued to fall at a record pace in January, according to a leading national index released Tuesday.

The Standard & Poor’s/Case-Shiller index of home prices in 20 metropolitan areas showed a 19% drop from the same month a year ago, the largest decline on record for a January. All 20 metropolitan areas showed a price decline from a year earlier.

Since peaking in 2006, the national index has fallen 29%.

Regionally, the Los Angeles-Orange County area was down 39% from its peak in 2006. But the worst decline was in Phoenix, where the index of area home prices was 49% below its peak, and four other metro areas showed declines greater than 40% from their respective highs: Las Vegas, Miami, San Francisco and San Diego.

The national index has posted record year-to-year declines every month since October 2007.

Western states and Florida, which had the greatest price increases during the real estate run-up in the mid-2000s, have seen severe price declines caused by the large number of foreclosures over the last year.

Those drops were reflected in the year-to-year numbers. The index for Los Angeles-area prices declined 25.8% in January from the year-earlier figure. The three sharpest January declines were in Phoenix (35.0%), Las Vegas (32.5%) and San Francisco (32.4%). The smallest annual drops were in Dallas, Denver and Cleveland, which each saw 5% declines.

The drop-off in Los Angeles prices varied according to market segment.

Prices for the most expensive homes sold in January, those in the top third of the price range, fell 30% in January from a year earlier. The index for the least expensive third of the market dropped 50% in the 12-month period, and mid-priced homes fell 40%.

Heavy subprime lending at the lower end of the market probably contributed to the sharper decline, experts have said. A higher percentage of loan defaults among subprime borrowers -- those with poor or no credit history -- led to many foreclosures, which in turn flooded lower-end markets with houses and pulled prices down further.

Foreclosures nationwide are hitting higher-priced homes as well. Data released Tuesday by the Hope Now coalition of home loan and housing groups show foreclosures of prime mortgages -- those issued to better-qualified borrowers -- are rising. That could lead to further price erosion of more expensive homes.

Hope Now said foreclosures on prime mortgages climbed to 55,530 in February from 30,413 a month earlier. Subprime foreclosures, meanwhile, fell to 31,816 from 37,700 in January.

Little more than a year ago, foreclosures involving subprime loans vastly outnumbered those of prime loans -- 58% more in the last three months of 2007. But by the end of 2008, the number of foreclosures in each category was about the same.

The Case-Shiller index compares the sale prices of homes against their previous sales and corrects for factors that would alter a home’s value, such as remodeling. Rather than state values in dollars, an index number is used, with 100 representing prices in January 2000. The latest Los Angeles index number was 166.54.

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peter.hong@latimes.com