NEW YORK - March 27, 2012 - The housing market started off the new year with a thud. Home prices dropped for the fifth consecutive month in January, reaching their lowest point since the end of 2002.

The average home sold in that month lost 0.8% of its value, compared with a month earlier, and prices were down 3.8% from 12 months earlier, according to the S&P/Case-Shiller home price index of 20 major markets.

Home prices have fallen a whopping 34.4% from the peak set in July 2006.

"Despite some positive economic signs, home prices continued to drop," said David Blitzer, spokesman for S&P. "Eight cities - Atlanta, Chicago, Cleveland, Las Vegas, New York, Portland, Seattle and Tampa - made new lows."

Only three of the 20 index cities registered gains in January, led by Phoenix, which climbed 0.9% month-over-month, Washington, up 0.7%, and Miami, which edged 0.6% higher.

Housing market indicators have sent clear signals of the continuing Depression, with existing home sales and new home sales down month-over-month in February.

Potential homebuyers lack confidence in the market, according to Michael Feder, CEO of Radar Logic, an analytics company that produces daily spot prices for real estate. A big problem looming is a massive number of potential foreclosures.

"Potential buyers see that there are millions of homes underwater, and at elevated risk of foreclosure, and conclude that housing values are unlikely to appreciate in any meaningful way for many years," he said.