U.S. home prices fell in 19 of 20 major cities in October, suggesting that the country's large inventory of foreclosed properties is still overhanging its sputtering housing recovery.

The Standard & Poor's/Case-Shiller index showed the average price in the 20 monitored cities was 3.4 per cent lower than in October 2010. The drop was steeper than the 3.2 per cent drop economists surveyed by Bloomberg had forecast.

Prices in a majority of cities fell month-over-month for the second straight time. Before that, they had risen for five consecutive months in at least half of the cities tracked.

Atlanta posted the biggest monthly decline, with prices off five per cent from September and down 11.7 per cent from a year earlier. Residential home prices in Atlanta and Las Vegas fell to their lowest points since the housing crisis began.

David M. Blitzer, chairman of S&P's index committee, said the big price drops in some cities were particularly worrisome because their gains earlier this season had been so strong.

"Atlanta and the Midwest are regions that really stand out in terms of recent relative weakness," Blitzer said. "These markets were some of the strongest during the spring/summer buying season."

Only one tracked city — Phoenix — recorded a month-over-month price rise in October. Over a one-year period, Detroit and Washington are the only cities to see prices rise.   

Prices are likely to fall more next year as soon as more banks resume foreclosures. Millions of foreclosures were put on hold earlier this year while the U.S. government investigated mortgage lending abuses. A bank regulator reported last week that new home foreclosures in the third quarter jumped more than 21 per cent year-over-year to 347,726.

Nearly a quarter of all U.S. homeowners with mortgages are now underwater, meaning they owe more on their homes than their homes are worth.

The Case-Shiller index is based on a three-month moving average of prices.

With files from The Associated Press