Today's Coming Crisis Movie

Monday, May 9, 2011

US house price drop accelerates as financial crisis deepens

US house prices have suffered their biggest quarterly fall since the collapse of Lehman Brothers, underlining the scale of the headwinds still facing the world's biggest economy.

Average house prices slumped 3pc in the first three months of this year, a decline that pushed the number of homeowners in negative equity – where a mortgage is higher than the value of a property – to 28pc from 22pc a year earlier, according to new research from Zillow, a major US property website.

American homeowners are enduring the first national drop in prices on record after the most recent boom drove up values and fuelled a boom in homebuilding. Average prices are 33pc below the peak they reached in July 2006, according to the S&P/Case-Schiller Index.

As in Britain, the outlook for prices remains uncertain.

That excess of supply has left repossessed homes accounting for between 30pc and 40pc of current sales, which is in turn driving prices lower.

"Home value declines are currently equal to those we experienced during the darkest days of the housing recession," said Stan Humphries, chief economist at Zillow. "Rising foreclosures and high negative equity rates make it almost certain that we won't see a bottom in home values until 2012 or later." (read more)