Housing prices are still falling, according to Bank of America/Merrill Lynch economist Michelle Meyer, and this could spread to more affluent homes.

The latest report from LoanPerformance, released this week, showed another notable decline in November, with prices down 5% from the recent peak in May. According to Case-Shiller data, which divides metro-areas into three price tiers, the upper tier had the most moderate rise and fall. But mortgage delinquencies have begun among prime borrowers, which means real estate price plunges could spread to higher-price homes.

The big boom-to-bust real estate markets in California, in Los Angeles, San Francisco and San Diego, have seen a pickup in demand, but could suffer from continuing high unemployment and the expiration of the state homebuyer tax credit. 

Prices have continued to plunge in Miami and Tampa, two other boom-to-bust cities.

The data this week will revolve around the housing market. The National Association of Home Builders said today that its monthly reading of builders' sentiment remained negative. Homebuilders have been gloomy since April, 2006.

"At this point, housing remains on the sidelines of a weak economic recovery," said David Crowe, the trade association's chief economist.

Many smaller, private builders still have trouble getting credit, and tighter lending standards have kept out some buyers. Builders also face competition from sharply discounted foreclosed homes.

“On balance, the data should show that the housing market is still far from normal,” says Meyer, although there should be a solid gain in existing home sales reported on Thursday. 

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