U.S. home prices may fall further than previously expected, by another 12.5% to 2002 levels, before showing more stability in late 2010, according to Fitch Ratings.

"Currently, prices are hovering around levels seen in mid 2003," Fitch said. The rating agency said it previously had expected a 10% further decline. Huxley Somerville, group managing director and U.S. RMBS group head at Fitch, said reasons for the revised forecast include "very weak employment, limited refinancing opportunities and turbulent financial markets have extended into the first months of 2009."

He added that "government initiated programs have yet to yield any positive benefits."

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