A closely watched gauge of U.S. home prices shows they are falling sharply across most of the nation, as a deepening slump in the housing market threatens to damp consumer spending.
The silver lining behind the latest home-price data is that they signal the market is making what most economists see as a necessary adjustment, dragging home prices back into closer alignment with Americans' ability to pay. The market is working its way "back to reality," says David Seiders, chief economist of the National Association of Home Builders. He thinks house prices will bottom out by early 2009.
Some other economists say that might not happen before 2010. "The housing shock is only about halfway over, and housing prices will continue to fall well into 2009," says Lehman Brothers economist Michelle Meyer.
(HT Greg Mankiw)