WASHINGTON (AP) -- The housing market plunged deeper into despair last month, with sales of new homes plummeting to their lowest level in more than 12 years.

The slump worsened even more than most analysts expected, heightening fears that the country might be thrust into a recession. New-home sales tumbled 9 percent in November from October to a seasonally adjusted annual sales pace of 647,000, the Commerce Department reported Friday. That was the worst sales pace since April 1995.

"It was ugly," declared Richard Yamarone, economist at Argus Research. "It is the one sector of the economy that doesn't show any signs of life. It doesn't look like there is any resuscitation in store for housing over the next year," he said.

The housing picture turned out to be more grim than most anticipated. Many economists were predicting sales to decline by 1.8 percent to a pace of 715,000.

By region, sales fell in all parts of the country, except for the West.

In the Midwest, new-home sales plunged 27.6 percent in November from October. Sales dropped 19.3 percent in the Northeast and fell 6.4 percent in the South. In the West, however, sales rose 4 percent.

Over the last 12 months, new-home sales nationwide have tumbled by 34.4 percent, the biggest annual slide since early 1991, and stark evidence of the painful collapse in the once high-flying housing market.

"I think you can classify what we are seeing in the housing market as a crash," said Mark Zandi, chief economist at Moody's Economy.com. "Sales and home prices are in a free fall. The downturn is intensifying."

The median sales price of a new home dipped to $239,100 in November. That is 0.4 percent lower than a year ago. The median price is where half sell for more and half for less.

On Wall Street, the grim home sales report added to investor angst. The Dow Jones industrials were off 40 points in afternoon trading.

Would-be home buyers have found it more difficult to secure financing, especially for "jumbo" mortgages -- those exceeding $417,000. The tighter credit situation is deepening the housing slump. Unsold homes have piled up, which will force builders to cut back even more on construction and look for ways to sweeten the pot to lure prospective buyers.

"A lot of borrowers are being disqualified for loans. If you can't qualify for a mortgage the game is over. For those who do qualify, it takes longer to get loans," said Brian Bethune, economist at Global Insight.

The housing market has been suffering through a severe slump following five years of record-breaking activity from 2001 through 2005. Sales turned weak as did home prices. The boom-to-bust situation has increased dangers to the economy as a whole and has been especially hard on some homeowners.

Foreclosures have soared to record highs and probably will keep rising. A drop in home prices left some people stuck with balances on their home mortgages that eclipsed the worth of their home. Other home buyers were clobbered as low introductory rates on their mortgages jumped to much higher rates, which they couldn't afford.

Problems in housing are expected to persist well into 2008 -- a major election year.

The housing and mortgage meltdowns have raised the odds that the country will fall into a recession. And, the situation has given Democrat and Republican politicians-- including those who want to be the next president -- plenty of opportunities to spread blame around.

The economy's growth is expected to have slowed sharply to a pace of just 1.5 percent or less in the final three months of this year. Former Federal Reserve Chairman Alan Greenspan recently warned that the economy is "getting close to stall speed." The big worry is that the housing and credit troubles will force individuals to cut back on spending and businesses to cut back on hiring and capital investment, throwing the economy into a tailspin.

To help bolster the economy, the Federal Reserve has sliced a key interest rate three times this year. Its latest rate cut, on Dec. 11, dropped the Fed's key rate to 4.25 percent, a two-year low. Many economists are predicting the Fed will lower rates again when they meet in late January.

"The risks are as high as they've ever been during this expansion that started in late 2001 that the economy will fall into a recession," said Bethune. "The odds are now nudging up close to the 50 percent mark."

NEW YORK (AP) -- U.S. home prices fell in October for the 10th consecutive month, posting their largest monthly drop since early 1991, a widely watched index showed on Wednesday.

The record 6.7 percent drop in the Standard & Poor's/Case-Shiller home price index also marked the 23rd consecutive month prices either grew more slowly or declined. "No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," said Robert Shiller, who helped create the index, in a statement.

The previous record decline was 6.3 percent, recorded in April 1991. The S&P/Case-Shiller home price index tracks prices of existing single-family homes in 10 metropolitan areas compared to a year earlier. The index is considered a strong measure of home prices because it examines price changes of the same property over time, instead of calculating a median price of homes sold during the month.

The broader Case-Shiller index of 20 metropolitan areas fell 6.1 percent. Among the 20 metropolitan areas used in the broader index, 11 posted record monthly declines and all 20 declined in October compared to September.

Miami posted the largest decline among those 20 markets. Home prices in the Miami metropolitan area fell 12.4 percent in October compared to the same month last year, surpassing Tampa, Fla. as the worst-performing city. Tampa posted a year-over-year loss of 11.8 percent.

Besides those two cities, Detroit, Las Vegas, Phoenix and San Diego also posted double-digit year-over-year declines.

Atlanta and Dallas, which had previously posted price appreciation, fell in October. Prices fell 0.7 percent in Atlanta and 0.1 percent in Dallas compared to a year earlier.

Only three areas -- Charlotte, N.C., Portland, Ore. and Seattle -- posted year-over-year home price appreciation in October. Charlotte posted the largest gains at 4.3 percent.

Bob Morgan, president of the Charlotte Chamber of Commerce, said the area's economy continues to create jobs at record levels. While the numbers are preliminary, more than 14,000 jobs were created in the Charlotte area in 2007, he said, compared with more than 12,000 jobs in 2006.

The job growth is coming from a "pretty healthy" variety of sectors, including the financial industry, Morgan said. Charlotte is home to two of the nation's four largest banks, Bank of America Corp. and Wachovia Corp.

Carole Brake, the sales manager at Bissell Hayes Realtors SouthPark Office in Charlotte, said prices are still up despite an increase in inventory.

"Sellers are not in a mode to reduce their prices. They want a fair market price for their home," Brake said.

NEW YORK (Reuters) - There is a "substantial" risk that U.S. home prices will slide for the next three years or more, in a downturn that could be unlike anything seen before on a national level, Morgan Stanley said on Thursday in a report. Price levels of the RPX Index, a derivative index based on home prices in 25 U.S. metropolitan residential property markets, indicate an expectation that prices will decline for the next three years, with a recovery likely to occur between three and four years from now, Morgan Stanley said.

"The property derivatives market seems to be suggesting that we are in a very different environment, on the heels of market events that could force a housing recession like none ever imagined or experienced," Morgan Stanley analysts said.

"The fundamental argument for going long housing is that history has never seen such extended periods of house price declines," Morgan Stanley said. "We think that such arguments have limited credibility because of limited periods of data and over-reliance on analysis using national level data."

While home price declines for three years or longer have not occurred in recent years on a national level, regional data demonstrates that unusual price increases often lead to sustained corrections, the report said.

Morgan Stanley used data from the Office of Federal Housing Enterprise Oversight going back to 1979, which show that home prices did not post yearly declines on a national basis between 1979 and 2006.

"It is the lack of historical downturns which investors are using to argue that things could not be as bad as the market implies," Morgan Stanley said.

Data from individual metropolitan areas, however, show that regional housing downturns occurred in around 11 percent of the years analyzed, and the average negative streak lasted 1.5 years, the bank said. In 53 episodes of downturns in local markets, seven lasted for three years or more, "which does not appear to be such a small frequency to us," Morgan Stanley said.

Higher-than-normal price increases over three-year periods have historically resulted in price declines in metropolitan areas. In 23 of the 25 metropolitan areas in the index, returns in 2006 were slowing compared with 2004 to 2005, and "this may also be an indication of a pronounced downturn," the report said.

"We believe that the regional behaviors of the past can serve as guides on a larger scale," Morgan Stanley said.

"There is always a chance that things can change quickly, but given the tremendous overhang of subprime pressures, risk of recession, and the higher cross-regional correlations, we think the probability of a three-plus-year downturn is substantial," the bank said.

WASHINGTON (AP) -- Home foreclosures shot up to an all-time high in the third quarter, fresh evidence of the problems afflicting distressed homeowners amid the housing meltdown.

The Mortgage Bankers Association in its quarterly snapshot of the mortgage market released Thursday said that the percentage of all mortgages nationwide that started the foreclosure process jumped to a record high of 0.78 percent during the July-to-September period. That surpassed the previous high of 0.65 percent set in the prior quarter.

More homeowners also fell behind on their monthly payments.

The delinquency rate for all mortgages climbed to 5.59 percent in the third quarter. That was up from 5.12 percent in the second quarter and was the highest since 1986, the association said. Payments are considered delinquent if they are 30 or more days past due.

Homeowners with spotty credit who have subprime adjustable-rate loans were especially hard hit. Foreclosures and late payments for these borrowers also reached all-time highs in the third quarter.

The percentage of subprime adjustable-rate mortgages that entered the foreclosure process soared to a record of 4.72 percent in the third quarter. That was up from 3.84 percent in the second quarter. Late payments jumped to a record high of 18.81 in the third quarter, up from 16.95 percent in the second quarter.

The association's survey covers more than 45 million home loans nationwide.

The new figures came as President Bush, accused by Democrats and other critics of not doing enough to help stem the mortgage crisis, was set to unveil a plan Thursday that would allow some homeowners with certain subprime home loans to freeze their interest rate for five years. The plan aims to prevent some distressed borrowers from losing their homes. It also is intended to ease the danger facing the economy from a wave of foreclosures -- something that would further aggravate problems in the housing market.

Homeowners with spotty credit histories or low incomes who took out higher-risk subprime adjustable-rate mortgages have suffered the most distress as the housing market went from boom to bust.

Initially low interest rates that reset to much higher rates have clobbered these borrowers. Analysts estimate that nearly 2 million adjustable-rate subprime mortgages will reset to higher rates this year and next.

Doug Duncan, the association's chief economist, said in an interview with The Associated Press that foreclosures and late payments are likely to stay high or get worse in the coming quarters.

The mortgage meltdown has hit financial companies with billions of dollars in losses from bad subprime mortgage investments. Some lenders have been forced out of businesses. The situation has elevated the odds of the country falling into a recession. It has roiled Wall Street and has offered lots of fodder for Democrats and Republicans to blame each other for the mess.

Against this backdrop, the Federal Reserve next week is expected to slice a key interest rate for a third time this year to bolster the economy.

Duncan said there were a host of factors to blame for the rise of foreclosures and late payments in the third quarter: broad-based declines in home values; the resetting of adjustable-rate mortgages to higher rates; the drying up of credit for subprime and "jumbo" mortgages, those exceeding $417,000; and economic weakness in some parts of the country.

California and Florida -- the two largest states in terms of outstanding mortgages -- were key drivers in the increase in the national foreclosure rates, the association said. The two states together accounted for 33.7 percent of the subprime adjustable-rate loans that entered the foreclosure process in the third quarter. The two states combined also accounted for 42.4 percent of creditworthy "prime" adjustable-rate mortgages that started the foreclosure process.

WASHINGTON (AP) -- The Bush administration has hammered out an agreement to freeze interest rates for certain subprime mortgages for five years to combat a soaring tide of foreclosures, congressional aides said Wednesday.

The aides, who spoke on condition of anonymity because the details have not yet been released, said the five-year moratorium represented a compromise between desires by banking regulators for a longer time frame of up to seven years and mortgage industry arguments that the freeze should last only one or two years.

Another person familiar with the matter said the rate-freeze plan would apply to borrowers with loans made at the start of 2005 through July 30 of this year with rates that are scheduled to rise between Jan. 1, 2008, and July 31, 2010.

The administration said President Bush will speak on the agreement at the White House on Thursday and the Treasury Department announced that Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson would hold a joint news conference Thursday afternoon with mortgage industry officials.

Treasury also announced there would be a technical briefing to explain more of the proposal's details.

Paulson, who has been leading the effort to craft a plan, said on Monday that the program would only be available for owner-occupied homes -- to ensure the break is not given to real estate speculators.

The plan emerged from talks between Paulson and other banking regulators and banks, mortgage investors and consumer groups trying to address an avalanche of foreclosures feared as an estimated 2 million subprime mortgages reset from lower introductory rates to higher rates.

In many cases, the higher rates will boost monthly payments by as much as 30 percent, making it very difficult for many people to keep current with their loans.

The plan is aimed at homeowners who are making payments on time at lower introductory mortgage rates but cannot afford a higher adjusted rate.

Through October, there were about 1.8 million foreclosure filings nationwide, compared with about 1.3 million in all of 2006, according to Irvine, Calif.-based RealtyTrac Inc. With home loan defaults still rising, the trend is expected to worsen next year.

The plan represents an about-face for Paulson, who until recently had insisted the mortgage crisis could be handled on a case-by-case basis. However, he and other administration officials became convinced the tide of foreclosures threatened by the mortgage resets represented such a severe threat that a more sweeping approach was needed. They opted for a proposal that was along the lines of a plan put forward in October by Sheila Bair, head of the Federal Deposit Insurance Corp.

Paulson and other federal regulators began holding talks with some of the country's biggest mortgage lenders, mortgage service companies, investors who hold mortgage-backed securities and nonprofit groups that provide counseling for at-risk homeowners.

Under the typical subprime loan -- those offered to borrowers with spotty credit histories -- the rates for the first two years were at levels around 7 percent to 9 percent. But after two years, those rates were scheduled to reset to levels around 9 percent to 11 percent.

For a typical $1,200 monthly mortgage payment, the reset could add another $350 to the monthly payment, greatly raising the risks of loan defaults by homeowners struggling with the current payment.

The wave of mortgage foreclosures threatened to make the most severe slump in housing even worse by dumping more foreclosed properties onto an already glutted market, further depressing home prices and shaking consumer confidence.

The deepening housing slump has already roiled financial markets, starting in August, as investors grew increasingly concerned about billions of dollars of losses being suffered by banks, hedge funds and other investors.

The administration plan is designed to deal with the crisis by letting subprime borrowers who are living in their homes and are current on their payments to avoid a costly reset for five years. The hope is that by that time the housing downturn will have stabilized, clearing out the glut of unsold homes and halting the steep slide in prices that is hitting many parts of the country.

With sales and prices once again rising, the expectation is that homeowners will be able to renegotiate their current adjustable rate mortgages into a more affordable fixed-rate plan.

The housing crisis has become an issue in the presidential race with Democrats Hillary Rodham Clinton and John Edwards putting forward their own proposals this week that would go further than the administration.

Clinton said her own proposal that would impose a 90-day moratorium on foreclosures and freeze the rates for five years or until they had been converted to fixed-rate loans was a better approach that would help more people.

"Although the administration is finally giving the foreclosure crisis the attention it deserves, it seems that President Bush is going to give struggling homeowners far less than they need," she said in a statement.

Mark Zandi, chief economist for Moody's Economy.com, called the administration plan a good first step, but said the government eventually will have to go further given the problem's size and the threat to the economy.

"This is the most serious housing downturn we have seen in the post World War II period," Zandi said. "It is a threat to the broader economy. The risks of a recession are very high."

Associated Press reporters Deb Reichmann and Nedra Pickler contributed to this report.