Home prices in big US cities fell at a record 18.2 per cent in the year to November as the stricken housing market showed no signs of bottoming out.
The drop followed an 18 per cent year-on-year decline in the prior month, itself a record, as prices fell more steeply in a wider array of cities including Boston and New York, according to the closely watched Case-Shiller index released on Tuesday.
At the same time, US consumer confidence fell to a new low in January, falling to 37.7 from 38.6 the prior month.
The cities facing the sharpest declines from the previous month in November were Phoenix, Las Vegas and Detroit.
“The recession is biting across an increasingly wide swathe of sectors, with almost nowhere and nobody immune,” said Alan Ruskin, strategist at RBS Greenwich Capital.
November was the 28th consecutive month that the index, published by Standard and Poor’s, declined. Of the 20 large cities tracked, 11 showed record drops in the value of single-family homes.
“The freefall in residential real estate continued through November 2008,” said David Blitzer, chairman of the index committee at S&P.
Since the US housing market peaked in July 2006, the home price index has fallen by 25 per cent. In the seven years prior to its peak, the index had jumped by 155 per cent and economists predict that prices will continue to fall.
“We continue to believe that it is unlikely that we are anywhere near a bottom in nationwide home prices,” said Joshua Shapiro, chief US economist at MFR, predicting that prices are between half and two-thirds of their way through the total decline in this cycle.
Monthly declines in home prices abated somewhat last summer, but the pace quickened last autumn. According to economists at High Frequency Economics, housing wealth is falling $380bn per month in the US, or $370 per adult a week.
Falling prices have created a jump in home sales, as bargain hunters have been lured back to the market. Home resales increased 6.5 per cent to a seasonally-adjusted annual rate of 4.74m in December, the National Association of Realtors said on Monday, but were down 3.5 per cent year on year.
The median price of an existing home plummeted 15.3 per cent year on year to $175,400, the sharpest decline since records began in 1968.
“No wonder people are miserable,” said Ian Sheperdson, chief US economist at High Frequency.
The Conference Board confidence index said on Tuesday that consumers felt worse about current conditions in January, defying predictions of a rebound. Of the 5,000 US households queried, 47.9 per cent said that current conditions had worsened, up from 45.8 per cent in December.
A bright note was slightly improved feelings about the labour market. In spite of widespread cuts, fewer consumers said they felt jobs were hard to find. However less consumers are expecting their incomes rise.
By Alan Rappeport in New York
27 Jan 2009 4:21pm
Source: The Financial Times