US house prices fell by more than expected in September, again dashing expectations that the housing market will stabilise and posing a continued threat to economic growth in 2012.
The S&P Case-Shiller 20-city home price index showed that house prices fell 3.6 per cent in September from the same period last year after a 3.8 per cent drop in August. Analysts surveyed by Bloomberg had expected a 3 per cent decline. The index was relatively unchanged month on month.
David Blitzer, chairman of the S&P’s index committee, said that “any chance of a sustained recovery will probably need a stronger economy”.
US house prices continued to slide – they are now down by more than 31 per cent from their 2006 peak – despite record low mortgage rates that mean the cost of buying a home looks low relative to incomes.
It also highlights how US policymakers have failed to resolve the three interlinked crises gripping the housing market: the lack of credit or refinancing options for borrowers with lower credit scores, the continued overhang of foreclosed properties, and a plague of distressed or unoccupied homes that are dragging whole neighbourhoods down with them.
“I see a strong case for additional policies to foster more rapid recovery in the housing sector,” said Janet Yellen, vice-chairwoman of the US Federal Reserve, in a speech in San Francisco.
“The scope remains to provide additional accommodation through enhanced guidance on the path of the federal funds rate or through additional purchases of longer-term financial assets,” said Ms Yellen, who has been one of the most aggressive policymakers in pushing for stronger Fed action to support the economy.
The worst house price falls were in those areas scarred the most by high unemployment and foreclosures. Three cities posted new lows since the first reading of the index in 2006 – Las Vegas, Atlanta and Phoenix.
“It is a bit disturbing that we saw three cities post new crisis lows. For the prior three or four months, only Las Vegas was weakening each month,” said Mr Blitzer. “Now Atlanta and Phoenix have fallen to new lows too.”
There was one bright spot in Tuesday’s economic data, however, with consumer confidence bouncing by 15 points to its highest level in more than a year. The Conference Board’s index of consumer confidence rose to 56 in November, up from a revised reading on 40.9 for October.
“Consumers’ assessment of current conditions finally improved, after six months of steady declines. Consumers’ apprehension regarding the short-term outlook for business conditions, jobs and income prospects eased considerably,” said Lynn Franco, director of the Conference Board Consumer Research Center.
The bounce in confidence matches the apparent resilience of consumer spending in recent months despite bad news from the eurozone and an acrimonious debate on fiscal policy in the US.
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