Americans fear home price drop accelerating

NEW YORK (Reuters) - Americans fear home prices will drop more sharply in the coming year, despite government efforts to resuscitate the battered real estate sector, according to a poll released on Friday.

U.S. homeowners surveyed by Reuters and University of Michigan predicted their home values would fall by 2.2 percent in the year ahead, the biggest anticipated decline in the past few years.

This predicted decline in March was steeper than the expected average fall of 1.9 percent in February.

Concerns that home value depreciation will intensify underscored the severe damage to consumer psychology stemming from the bursting of the housing bubble, heavy losses in the stock market and massive job losses.

If consumers, who account for more than two-thirds of U.S. economic activity, stay jittery about home prices, it will diminish the chance of the recession, the worst in decades, ending this year.

In the event of home prices rebounding, Americans downgraded the extent of future price rises, according to the survey.

"Even after the decline ends, the plunge in home prices has been so steep that it will be years before these concerns are completely erased and the negative wealth drag on spending growth disappears," said survey director Richard Curtin.

The average annual five-year expected gain among homeowners surveyed slipped to 1.9 percent in March, the smallest in the past two years and compared with the 2.4 percent rise seen last month.

U.S. home prices have tumbled more than 26 percent since their peak almost three years ago, according to Standard Poor's/Case-Shiller indexes.

A less gloomy aspect of the survey showed fewer homeowners saw a drop in the value of their homes in March. The share of these homeowners fell to 56 percent from 63 percent in February.

But it is too early to tell whether this decline portends a turnaround in housing. "That insignificant improvement hardly constitutes a turning point," Curtin said.