Prices of U.S. single-family homes fell 18.7 percent in March from a year earlier, while prices in the first quarter dropped at a record pace, according to the Standard & Poor's/Case-Shiller Home Price Indices released on Tuesday.

Tudor Style (Source: Realtor Magazine Online)

The U.S. housing market is in the worst downturn since the Great Depression as a huge supply of unsold homes, tighter lending standards and record foreclosures push down prices.

Many potential home buyers have been staying on the sidelines, waiting for prices to hit bottom and for the economy to stabilize. Economists contend that the economy might not emerge from its severe slump unless the housing market stabilizes.

On a month-over-month basis, the index of 20 metropolitan areas fell 2.2 percent in March from February, S&P said. The 20-city index dates back to 2000.

A Reuters poll of economists expected home prices to fall 2.O percent on a month-over-month basis and 18.4 percent year-over-year.

Price drops on both a month-over-month and year-over-year basis were worse than expected, based on a Reuters survey of economists.

The composite index of 10 metropolitan areas declined 2.1 percent in March from February for a 18.6 percent year-over-year drop. The 10-city index dates to 1988.

Declines in residential real estate continued at a steady pace into March, David M. Blitzer, chairman of the Index Committee at Standard & Poor's, said in a statement.

However, he said it was the second month since October 2007 in which the 10- and 20-city composites did not drop at a record annual pace.

Adam York, an economist at Wachovia in Charlotte, North Carolina, said the declines remained significant at more than a 25 percent annual rate over the past three months for the 20-city composite.

Home price declines will likely continue into 2010, considering the weakness in both the housing market and the broader economy, but hopefully the pace of decline will moderate over the next few quarters, he said.

The S&P/Case-Shiller U.S. National Home Price Index continues to set record declines, a trend that began in late 2007 and prevailed throughout 2008. The index, which covers all nine U.S. census divisions, recorded a 19.1 percent decline in the first quarter of 2009 from the first quarter of 2008, the largest decline in the 21-year history of the series.

As of March 2009, average home prices across the United States were at similar levels to those in the fourth quarter of 2002. From the peak in the second quarter of 2006, average home prices are down 32.2 percent.