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Consumers Forgoing Retailers' Discounts
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Foreclosures, which make up 35 to 40 percent of the market, were a major factor driving down prices, Smith said.
Analysts expect more foreclosures will also contribute to the glut of houses on the market already.
"We definitely expect home prices to decline further not just because of foreclosures but because there is still a lot of imbalance in the market . . . because of excess supply," said Orawin Velz, an economist with the Mortgage Bankers Association in Washington.
With fewer people buying homes and more people having a harder time accessing credit, orders for washing machines, refrigerators and other big-ticket items fell in October by a bigger-than-expected 6.2 percent.
Consumer spending is likely to be further hampered in the near future by rising unemployment.
While the number of people applying for the first time for unemployment benefits dipped slightly, to 529,000, last week, according to the Labor Department, a four-week average of initial jobless claims rose to 518,000, its highest level since January 1983. And unemployment is likely to rise for some time, Morici said.
"We're in a deep slide," he said. "This is what a bad recession looks like."
Staff writer Neil Irwin contributed to this report.
