Home prices still falling

This post comes from AnnaMaria Andriotis at partner site SmartMoney.

Home prices continue to fall, but a new group of cities is now leading the declines and posing new problems for home sellers.

Data released today by the S&P/Case-Shiller Home Price Indices shows that, nationally, home prices posted an annual decline of 3.9% in the third quarter compared with a year ago. But home prices fared far worse in cities that up until recently haven't been associated with the housing crisis. Post continues below.

"The poster children of the foreclosure problems are no longer the ones declining the most," says H. Pike Oliver, senior lecturer at Cornell University's Department of City and Regional Planning.

Homeowners in Atlanta have seen the biggest price drops over the past year -- down a whopping 10% year over year -- followed by Minneapolis, where home prices are down 7.4%. Also, home prices in Seattle and Portland are down 6.5% and 5.7%, respectively.

These cities are dealing with slower economies, high unemployment and foreclosures, says Maureen Maitland, vice president at the S&P Indices.

Experts say these price declines underscore a new phase to the housing crisis. While cities in Florida, Nevada and California are still posting losses, experts point out that their problems were largely caused by an overhang of inventory, homes that are now slowly being purchased by buyers. Instead, the cities where home prices are falling the fastest now are dealing with local economies that have stalled.

"What's happening now is the regions are beginning to show their differentiation -- some have more sound economies than others," says Maitland.

For home sellers, the bottom line is mixed. Would-be sellers who've been sitting on the sidelines until the market improves will have to determine how much longer they can wait, say experts. For the most part, home prices in 2012 could continue to drop or at best stay stable, says Jed Kolko, chief economist at real-estate listing site Trulia.

The sellers with the most leverage are those located in or near major cities, says Oliver, who says home prices there have been more stable than those in the suburbs. Homebuyers, he points out, are increasingly looking to purchase a home near major work centers that also helps them avoid long commutes and paying for soaring gas prices.

On the buying side, there appears to be more opportunity. While the market remains favorable for first-time homebuyers, it's also opening up to move-up buyers -- those who have a home and are thinking about selling in order to buy a newer, bigger one, says Oliver. If they're living in an area that has recouped some of its losses, they might be able to sell their home at a higher price than they could during the past couple of years while buying a larger home at a still depressed price, he says.

But consumers who are considering purchasing a home should plan to stay at least five years, experts say. Inventory remains high -- there are about 3.3 million existing homes on the market, according to the National Association of Realtors -- and it could rise if foreclosures pick up and when banks ultimately sell the foreclosed homes they've been holding on to, says Kolko. The result could be more losses in home values to come.

More on SmartMoney and MSN Money:

• Should I rent or buy a house?
• How appraisals are derailing home sales
• As new home sales rise, so do incentives
• Today's lowest mortgage rates
• Is your foreclosure eligible for review?
• How much house can you afford?