March 25 (Bloomberg) -- Home prices in 20 U.S. metropolitan areas fell in January by the most on record, a sign the housing recession is deepening, a private survey showed today.

The S&P/Case-Shiller home-price index dropped 10.7 percent from January 2007, after a 9 percent year-on-year decrease through December 2007. The gauge has fallen for 13 consecutive months.

Price declines will continue as foreclosures add to a glut of unsold properties, and stricter lending rules make it harder to get financing. Declining values leave homeowners feeling less wealthy and with less home equity to borrow against, undermining consumer spending and pushing the economy closer to a recession.

``The tremendous price weakness is likely to be a factor that significantly depresses consumer spending,'' said Joe LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York.

The home-price index was forecast to decline 10.5 percent, according to the median estimate of 18 economists surveyed by Bloomberg News. Projections ranged from declines of 9.5 percent to 11 percent. Case-Shiller began compiling year-over-year records on the 20-cities index in 2001.

January home prices fell 2.4 percent from a month earlier, following a 2.1 percent decline the prior month, the Case-Shiller report showed. The figures aren't adjusted for seasonal effects, so economists prefer to focus on year-over-year changes instead of month to month.

Biggest Declines

All but one of the 20 cities in the index showed year-over- year declines in prices in January, led by drops of 19.3 percent in Las Vegas and Miami. Prices rose in Charlotte.

Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, and Karl Case, an economics professor at Wellesley College, created the home-price index based on research from the 1980s.

Lehman Brothers Holdings Inc. forecasts home prices as measured by Case-Shiller will decline another 10 percent by the end of 2009. It predicts new-home sales will bottom in the middle of this year and existing-home sales and housing starts will reach a trough in the third quarter.

``Prices have reached what might be called a fair value,'' Dan North, chief U.S. economist at Euler Hermes ACI in Owings Mills, Maryland, said in a Bloomberg Television interview before the report. ``However, prices have still got to go substantially past that'' to trigger demand and a recovery.

Another Measure

A separate report from the Office of Federal Housing Enterprise today showed home values fell 3 percent in January from a year ago, and 1.1 percent from December.

The S&P/Case-Shiller index measures repeat home sales in 20 U.S. cities, regardless of mortgage size, while the Ofheo monthly index excludes sales of homes with mortgages higher than $417,000, the maximum allowed during that time for homes bought by government-chartered Fannie Mae and Freddie Mac.

Increasing numbers of economists are predicting that the economy has entered, or will soon enter, its first recession since 2001. Martin Feldstein, the Harvard economist who heads the research institute that determines when recessions begin, on March 14 said he thought the downturn began and would be the worst since World War II.

Fed View

``The tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters,'' the Federal Reserve said March 18 after it cut its benchmark lending rate by three-quarters of a point to 2.25 percent. ``Downside risks to growth remain.''

U.S. home foreclosure filings jumped 60 percent and bank seizures more than doubled in February as rates on adjustable mortgages rose and property owners couldn't sell or refinance as prices fall, Irvine, California-based RealtyTrac Inc., a seller of foreclosure data, said March 13.

About $460 billion of adjustable-rate mortgages are scheduled to reset this year, according to analysts at Citigroup Inc.

Financial sector losses and job cuts have been mounting since August, when subprime mortgage defaults began escalating, undermining the value of bonds backed by those loans.

Citigroup Inc. will cut 2,000 more trading and investment- banking jobs than previously announced, a person familiar with the plan said last week. That's on top of about 4,000 disclosed in January.

``This year we will have a larger number of reductions as we continue to strengthen the business and lower our expense base,'' the bank said in an e-mailed statement.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

Last Updated: March 25, 2008 12:57 EDT