US House Prices Fall Sharply in October 2007

The price of a new home in the US plummeted at the sharpest monthly rate in 26 years, official data for October showed today, adding to the gloomy outlook for the US economy as the housing market collapses.

The Commerce Department said the median sales price for a new home fell 8.6% to $217,800, from $238,400 in September. This was the fastest month-on-month decline since September 1981. The price was down 13% from the same time a year earlier - the largest annual fall since September 1970.

There was a slight increase in the annual sales pace of single-family homes to 728,000 in October from a downwardly revised rate of 716,000 the previous month. October’s rise was the first since April, but the revised figure from September was the lowest pace since January 1996.

A total of 516,000 new homes were on sale at the end of the month, a 2.3% drop from September. At the current sales rate, it would take eight and a half months to clear the glut of homes.

The weak data added to a series of poor figures on the US housing market this week. The Standard & Poor house price index showed the worst drop in the survey’s history, while figures on existing homes showed sales fell to a record low last month.

“The housing data added to the decline that was already underway,” said Michael Darda at MKM Partners. “Ongoing weakness in the residential tells us that the real estate recession is going to take a huge bite out of growth in the fourth quarter.”

But despite the deterioration of the housing market, government data showed the US economy is still holding up.

Robust exports, helped by the weak dollar, propelled economic growth ahead at the fastest rate in four years during the third quarter.

Gross domestic product rose at a revised 4.9% annual rate instead of the 3.9% reported a month ago.

US house prices fall sharply
Angela Balakrishnan | Guardian Unlimited