The drop in U.S. housing prices accelerated in the third quarter as the country's economy contracted at a faster pace than previously estimated, according to data released Tuesday.

The decline in the S&P/Case-Shiller U.S. National Home Price Index remained in double digits, posting a record 16.6 percent fall in the third quarter of 2008 compared with the same period of 2007.

This marks an increase from the annual declines of 15.1 percent and 14.0 percent for the second and first quarters of this year respectively.

The deepening financial crisis, which tightened credit conditions for home buyers, has weighed on housing prices. Rising unemployment rates, which hit 6.5 percent in October, made it hard for some homeowners to stay in their houses.

Distress sales – foreclosures and short sales – accounted for 35 to 40 percent of transactions in the third quarter, pulling down existing single-family prices, the National Association of Realtors said.

The weak economy and the depressing housing sector interlink in a vicious cycle. Lower property values are eroding household wealth, reducing consumer spending and increasing the likelihood of an economic recession.

In October, housing construction also fell to its lowest since 1959, the Commerce Department said, as building permits, a sign of future residential projects, dropped 12 percent.

Meanwhile, home builder confidence dropped in October to its lowest since 1985, with declines in construction spending continuing to be a drag on economic growth.

(Xinhua News Agency November 26, 2008)