November 27, 2007 (LPAC)--The rate of drop in average American home prices is now breaking records, according to its most accurate index, and threatening tens of millions of homeowners with owing more on their mortgages, than their home is worth on the market. This is a recipe for escalating mass foreclosures.

The Case-Shiller National Home Price Index, which tracks prices in 20 major metropolitan areas, fell 0.9% from August to September, and was then down 5% from the previous September, a record drop in the history of this measure. For the third quarter as a whole, the drop was 1.7% during the quarter (i.e., from June to September), and 4.5% from the third quarter of 2006, both also record falls. A sub-index of the largest 10 metro areas fell even more, by 5.5% from third-quarter 2006.

This price drop, which began in the second quarter of 2006, is accelerating, and still has a long way to go, according to the statisticians who maintain the Home Price Index, as well as other statisticians and a National Conference of Mayors meeting in Detroit today.

A separate study, by First American CoreLogic, made the alarming finding that when the average price drop hits 10%, roughly one-third of all mortgages taken out in the past two years, will be "upside-down"--that is, the homeowners will owe more than their house can be sold for. This negative-equity predicament is the crucial factor in driving mass foreclosures around the nation.

Three states--Florida, California, and Michigan--have already reached or exceeded the 10% year-to-year decline in price.