The seasonally adjusted Case-Shiller 20-City index fell for the fifth consecutive month, dropping 0.6 percent in September. The index has now fallen at a 4.1 percent annual rate over the last three months and is down by 3.6 percent from its level a year ago. The unadjusted 20-City index also fell by 0.6 percent with prices dropping in 17 of the 20 cities.

While prices have fallen almost everywhere since the peak of the housing bubble, it’s striking how badly bottom-tier homes have been hit in some of the most bubble-affected cities. Prices of bottom-tier homes are down by more than 50 percent from their bubble peaks in Chicago, Minneapolis and Los Angeles; by more than 60 percent in Tampa; and by more than 70 percent in Phoenix. Buying a moderate-income house in these markets near the peak of the bubble was an incredibly bad investment.

The current pattern of slowly declining house prices will likely persist into next year. There continues to be enormous excess supply in most areas, as evidenced most directly by the persistence of near-record vacancy rates. The continuation of extraordinarily low interest rates will be helpful, but on the other side the slow rate of job growth seems likely to persist through 2012.

For more in-depth analysis, read the latest Housing Market Monitor.