WASHINGTONDC, USA – HOME prices are weakening around the US, even in metro areas that were showing strength earlier in the year.

The Standard & Poor’s/Case-Shiller 20-city home price index released yesterday fell 0.2 per cent in August from July. Fifteen of the cities showed monthly price declines. Prices are expected to drop further in the coming months.

The biggest drop came in Phoenix. Prices there fell 1.3 per cent from a month earlier. And prices in three California cities that had been rebounding — San Francisco, San Diego and Los Angeles — fell by less than one per cent in August from July.

Detroit, Chicago, Washington, New York, and Las Vegas were the only cities to show monthly price increases. The 20-city index has risen 6.7 per cent from its April 2009 bottom. But it remains nearly 28 per cent below its July 2006 peak.

A higher proportion of foreclosed homes likely pushed down California markets, said David Blitzer, the S&P index’s chairman. During the summer, foreclosures were moving swiftly. That was before allegations surfaced of mortgage lenders using flawed documents to foreclose on homes. Lenders responded by freezing foreclosures in many states.

Even with the declines, the San Francisco area’s home prices were up by more than 21 per cent from spring 2009, when they hit bottom. Prices in San Diego were up nearly 14 per cent and in Los Angeles they were up by more than 10 per cent. Home values in all three of those cities had declined by at least 40 per cent from their peak in 2005 or 2006.

Those California cities “had come back very fast and very strongly”, Blitzer said. “Prices come down when you get a lot more foreclosures.”

Problems with flawed foreclosure paperwork could have a negative impact on other housing markets. That would happen if buyers fear purchasing foreclosed homes because the sale could be contested — or even cancelled — if the previous owner claims the foreclosure was invalid.

In an October survey taken by the National Association of Realtors, about 23 per cent of real estate agents said they have a client who is no longer interested in purchasing a foreclosed property due to the foreclosure-document mess.

In the short run, however, they could push up home prices if fewer foreclosed homes are put up for sale.

Home prices rose in many markets from April through July. But those increases were mostly fuelled by government tax credits, which have expired. Now that the peak buying season is over, a record number of foreclosures, job concerns and weak demand from buyers are pushing prices down.

Most experts expect roughly five million homes to be sold through the entire year. That would be in line with last year’s totals and just above sales for 2008, the worst since 1997.