Home prices are dropping in America's largest cities and are expected to fall through next year, with the worst declines coming in areas with high numbers of foreclosures.

The Standard & Poor's/Case-Shiller 20-city home price index fell 1.3 per cent in October from September. All cities recorded monthly price declines.

An auction sign for a property at the front garden of a foreclosed house in Miami Gardens, Fla. Foreclosures continue to depress U.S. home prices. (Caros Barri/Reuters)

"The double-dip is almost here as six cities set new lows for the period since the 2006 peaks," the chair of S&P's index committee David Blitzer said. "There is no good news in October’s report. Home prices across the country continue to fall."

On an annualized basis, home prices fell 0.8 per cent from October 2009. That's the largest decline since the 12-month period that ended in December 2009.

Home prices were buoyed until the spring by a new home buyer tax credit from the federal government. Without that stimulus, the rising number of foreclosed homes in major American cities is depressing prices, experts say.

"While delinquency rates might have seen some recent improvement, it is only on a relative basis. They are still well above their historic averages, in both the prime and subprime markets," Blitzer said. And housing starts remain near three-year lows.

Atlanta recorded the largest decline. Prices there fell 2.9 per cent from a month earlier. Washington, D.C., which had posted increases for six straight months, dropped 0.2 per cent in October.

Average home prices in hard-hit areas such as Phoenix and Las Vegas are now 47 per cent and 51 per cent below their respective levels of three years ago.

The 20-city index has risen 4.4 per cent from the bottom level it hit in April 2009. But the 20-city index is now almost 30 per cent off its all-time high in July 2006.

With files from The Associated Press