By Peter Viles – Los Angeles Times

A Washington think tank is warning that housing prices are falling at an accelerating level, destroying wealth at a pace that will cost the average homeowner $85,000 in lost wealth this year alone.

The projections by the Center for Economic and Policy Research are based on the numbers in Tuesday’s Case-Shiller home price index, which showed accelerating price declines in most big cities.

The annual rate of price decline over the last quarter was 24.9% in the 20-city index and 25.8% in the 10-city index,” the center said in its Housing Market Monitor today. “At this rate of price decline, the excesses of the housing bubble will have largely disappeared by the end of the year. At the same time, the price decline implies an incredibly rapid loss of wealth. In real terms, the rate of price decline in the 20-city index would imply a loss of almost $6 trillion in real housing wealth over the course of the year, an average of $85,000 per homeowner.”

I’m a so-so student of economic history, but I’d have to bet that, even adjusted for inflation, the only time that many Americans have lost that much wealth in a short period of time would have been during the Great Depression. I’m not even sure it happened during the Depression. (I understand: This hasn’t happened yet; it’s only a prediction.)

Repeating again: The CEPR says prices are falling so rapidly that the bubble will be gone by the end of 2008, but the loss of housing wealth will be massive.