Tuesday, March 22, 2011

US house prices tumble to lowest in almost a decade

US house prices have tumbled to their lowest in almost a decade, raising the prospect that even a recovery in the labour market may not be enough to pull prices from their slump.

The median price of a previously owned home in the US fell to $156,100 (£96,800) in February, the lowest level since 2002, the National Association of Realtors (NAR) said on Monday. The overall volume of purchases declined 9.6pc during the month, weaker than was expected on Wall Street.

The collapse in house prices helped precipitate America's worst recession since the Great Depression, and a recovery is proving elusive.

Despite the construction of new homes falling to a record low level, the market remains burdened by an excess of supply generated during the boom. "If the house price declines persist, even with the job market recovery, that could hamper recovery in the housing market," said Lawrence Yau, the chief economist at the NAR.

February saw prices fall across the country, with declines reaching double-digits in the midwest and the south.

Distressed sales - or those in which a lender has repossessed the house or the owner has agreed to a price below the value of the outstanding mortgage - accounted for 39pc of all sales. While distressed sales should eventually help the market find a bottom, it is likely to mean further declines on the way. (read more)