Report sees double-digit declines in home prices

House prices in U S metropolitan areas may decline by more than 10 percent in the months and years ahead as higher borrowing costs hurt demand, a study by a Moody's Corp. unit shows.

Home prices in Cape Coral, a city near Fort Myers in Southwest Florida, will fall by an estimated 19 percent between their peak in the fourth quarter of 2005 and the second quarter of 2007, the biggest drop among 70 cities covered by the survey, Moody's Economy.com said in a PRNewswire statement Wednesday. The slump may last until 2009 in some areas, it said.

``The housing-market downturn is in full swing," Mark Zandi, chief economist of Economy.com, said in the statement. ``Whether the housing correction unravels into a crash will largely depend on the secondary or indirect effects from the downturn."

The steepest slowdown in US home-price growth in three decades has pushed unsold homes to a record 4.4 million and slashed earnings for builders such as Lennar Corp. and Toll Brothers Inc.

The median home price in the United States next year may fall for the first time since the Great Depression, according to Gabriel Stein, chief international economist at Lombard Street Research in London.

Metropolitan areas in states such as California, Nevada, and Arizona also will have price declines of more than 10 percent, according to Economy.com, which is based in West Chester, Pa. Seven of the 10 largest predicted declines are in cities in Florida and California.

The housing boom lifted the US median home price by 49 percent in the five years ended in 2005, according to the Chicago-based National Association of Realtors. That added to the net worth of homeowners and creating a so-called wealth effect that spurred spending as homeowners refinanced and took on more mortgage debt.