Home Prices Fall At Record Rate

September 30 2008 - US home prices posted a record annual decline of 16.3 per cent in July and the pace of decline on a monthly basis also accelerated – the latest setback in the search for signs of recovery in the US housing market.

According to the closely-watched Case-Shiller index, produced by Standard & Poor’s and released on Tuesday, home prices in 20 large US cities fell by 0.9 per cent between June and July – whereas they had declined by 0.5 per cent between May and June.

Sunbelt cities such as Las Vegas and Phoenix, which have been at the heart of the US housing bust, recorded the largest monthly drops, of 2.8 per cent and 2.7 per cent respectively. Over a three-month period, however, the rate of house price declines has been slowing around the country.

Economists have been seeking indications of when the mortgage crisis will start to loosen its grip on the US economy, paving the way for a recovery to begin. But while the government seizure of Fannie Mae and Freddie Mac, the two large government-sponsored mortgage groups, has lifted expectations that mortgage financing could become more easily available to potential buyers, the recent turmoil in the credit and equity markets, is threatening to set back that progress.

“There are signs of a slow down in the rate of decline across the metro areas, but no evidence of a bottom,” said David Blitzer, chairman of the index committee at S&P.

Some cities did report improvements in house prices, with Minneapolis recording a 1.3 per cent gain on a monthly basis, compared with a 0.9 per cent rise in June, while the Tampa, Florida area posted flat house prices, compared with a 1.1 per cent decline in the previous report.

According to Bloomberg News, economists were on average expecting the annual drop on the Case-Shiller to reach 16 per cent in July, slightly up from the 15.9 per cent rate reported in June.

US home prices fall at record rate
by James Politi | Financial Times