The home-price index already has come down about 10% from its peak in mid-2006. But prices might need to fall much further, some analysts say. A recent Credit Suisse report projects that average home prices have another 40% to fall in the Miami metropolitan area, 36% in Phoenix, 26% in Los Angeles and 20% in Las Vegas if they are to become more in line with income levels.

Down, down, down

Here’s the WSJ’s lede:

A glut of foreclosed homes of historic proportions is starting to drive down U.S. home prices faster as lenders put more properties on the market and buyers show signs of interest.

The ability of America’s lenders to manage this fire sale will be crucial to determining how long the housing market stays in the dumps—and how quickly blighted neighborhoods can heal. The oversupply is severe: In some major markets, including Las Vegas and San Diego, foreclosure-related sales have accounted for more than 40% of all sales in recent months.

The Journal reports that about one in nine homes for sale is in foreclosure, compared to about one in fifteen a year ago.

And analysts haven’t all gone off their meds. Here’s one who warms our cold, bearish hearts:

The overabundance of foreclosed homes in the market is likely to push down home prices in much of the country for the next several years, says Ivy Zelman, chief executive of Zelman & Associates, a housing-research firm in Cleveland.

The WSJ, in an accompanying piece on A20, says lenders can’t sell foreclosed homes as fast as their defaulted buyers can mail in the keys. Foreclosure sales were up 4.4 percent last year, while foreclosures more than doubled. The foreclosure rate is the highest since record-keeping began in 1979 and the WSJ says “lenders describe the current situation as the worst since the Great Depression.”

Unnerved Americans

In economic news, Bloomberg reports that consumer-confidence survey released today will likely show sentiment fell to the lowest since March 2003, a jittery time since the U.S. was unleashing bombs on a new country at the time.

Declining stock and property values have also unnerved Americans, heightening concern spending will falter. Without consumers, which account for more than two-thirds of the economy, the slowdown triggered by the collapse in housing and credit markets is likely to deepen in coming months.

“The consumer is currently under heavy pressure,” said Russell Price, a senior economist at H&R Block Financial Advisors in Detroit. “People have seen their buying power erode. There is likely to be further downside to come.”

As if to prove Price’s point, Tiffany & Co. reported that same-store sales in the U.S. fell 1 percent last quarter, despite the cheap dollar luring foreign tourists to its stores.

When you’re 65

The Los Angeles Times reports that the Supreme Court ruled yesterday that employers can slash benefits for retirees when they turn sixty-five and become eligible for Medicare, something old-folks advocates had said was age discrimination.

The legal dispute highlights what some say is a gap in the law. Employers are not required by law to pay for health benefits for their employees or their retirees. And in most instances, they are free to change their benefit policies or to drop coverage they had previously offered.

Over the last decade, many employers have pulled back from providing these continued benefits to their retirees because of the high cost. But until Monday it had been unclear whether it was illegal to use a worker’s age—in this instance, 65—to trigger a reduction in benefits.

The AARP says it’s another way for corporations to get around their obligations to employees.

Work your way through college

The Journal on C1 reports on the growing exodus of banks from student lending, something the paper blames on the credit crunch as well as a law passed last year that cut subsidies for lending to students. Brazos Higher Education Service Corp. is the latest to exit because of problems in the credit markets.

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