U.S. home prices are unlikely to fall much further in the next year even after a “discouraging” report on values in September, said Karl E. Case, the co-creator of the S&P/Case-Shiller Index.

“If I were betting even odds, I’d bet that we don’t have much further decline, but that we bounce along the bottom,” Case, a retired professor of economics at Wellesley College, said today in a Bloomberg Television interview on “Surveillance Midday” with Tom Keene. “If you gave me 2-to-1 odds, I’d bet they go down.”

Home prices in September dropped 0.8 percent from August, the biggest monthly decline since April 2009, the S&P/Case- Shiller index of prices in 20 U.S. cities showed today. Values rose 0.6 percent from September 2009, the smallest year-over- year gain in eight months.

Fifteen of the 20 cities in the index showed year-over-year declines, led by a 5.6 percent slump in Chicago. Falling home values threaten to undermine consumer confidence and slow an economic recovery after the worst recession since the 1930s.

The S&P Case-Shiller index measures resale values over the most recent three months. The September slump wasn’t a surprise because the index moved past June, when sales were inflated by homebuyer tax credits worth as much as $8,000, Case said.

“You’d expect it to be down,” he said. “Nonetheless, it was discouraging in the face of the fact that a lot of these cities had done well in the previous 18 months. Whether that was because of the credit or not, housing prices were up as much as 20 percent in some markets.”

29% Below Peak

National prices fell 1.5 percent in the third quarter from the same period last year, and decreased 2 percent from the previous three months. Prices are 29 percent below their peak of July 2006.

Home prices may drop another 10 percent, Christopher Low, chief economist at FTN Financial in New York, and Luigi Zingales, professor of finance at the University of Chicago’s Booth School of Business, said on “Surveillance Midday” today.

“It’s hard to imagine that prices can rise with this huge overhang of foreclosures and vacancies,” Zingales said.

Prices will probably find a bottom quicker without government support of the housing market, Low said.

“It’s probably better to get this done sooner rather than later,” he said.

‘Cultural Change’

Robert Shiller, the index’s other creator, said on the program that a “catastrophic drop in confidence” makes it unlikely demand for homes will recover soon. He declined to predict price changes.

“There’s been a cultural change,” said Shiller, a Yale University professor, citing a five-year decline in a confidence index by the National Association of Home Builders. “It goes beyond any short-run forecasts.”

Sales of existing homes, which make up more than 90 percent of the market, declined more than forecast in October amid foreclosure moratoriums and the absence of the tax credit, the National Association of Realtors reported last week. Sales fell in July to the slowest pace in a decade’s worth of record- keeping by the Chicago-based group.

To contact the reporter on this story: John Gittelsohn in New York at johngitt@bloomberg.net.

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.