Two key indices of home prices likely fell in August, suggesting large numbers of foreclosures and continued high joblessness are acting as a drag on the market, according to a new forecast.

The Case-Shiller 20-city composite home price index, scheduled to be released on Tuesday, likely fell 3.8% in August from a year earlier and 0.3% from July on a seasonally adjusted basis, said a forecast from Zillow Inc. (Z) chief economist Stan Humphries. The downward trend will continue through the end of the year, he predicts.

“We expect to see continued home value depreciation as unemployment and negative equity remain high,” said Humphries. “The large foreclosure pipeline will produce relatively low priced REOs in the market, putting downward pressure on prices going forward, and we do expect the pace at which homes exit this pipeline to pick up in the near-term.”

The Case-Shiller 10-City composite index is expected to register a seasonally adjusted decline of 3.5% in August from the previous year, and 0.2% compared to July.

“After showing monthly appreciation earlier this year and building some momentum, recent weak economic data is starting to be reflected in home values,” Humphries said. “Existing home sales have been disappointing, with September sales down 3% from August.”

Humphries is bearish on the overall housing market for at least the next year.

A survey of more than 100 economists by Pulsenomics shows the median expectation for that group is a decline in the Case-Shiller 20-city index of 2.8% in the fourth quarter from the final three months of 2010. Zillow, on the other hand, is projected a 4.5% decline, and then another 2.5% drop from the fourth quarter of 2011 to 2012.

Zillow has a strong track record of accurately forecasting changes in these Case-Shiller indices. Zillow’s July forecast for the non-seasonally adjusted 20-city index was off by just 0.1 percentage point, coming in at 4.0% compared to the actual number of 4.1%.

Write to Liz Enochs.

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