More painful news for American housing markets is due this week as the respected Standard & Poor’s Case Schiller House price Index is expected to show yet another slump in prices in the 20 major metro markets across the US.
That index showed a 127% fall in house prices in February in those markets and last week the national real estate agents association in the US said not only did sales of existing homes fall by more than expected, but prices dropped 8% on a year ago. Sales of existing homes were down 17.5% from the annual rate in April last year and are off 30% from the record sales rate set in September 2005.
America’s National Association of Realtors reported on Friday that sales by homeowners fell in April to an annual pace of 4.89 million, down 1% from the revised March figure of 4.94 million.
The median price of a home sold during the month fell to $US202,300, down 8% from $US219,900 a year ago. Prices are being pushed down by the growing number of existing homes on the market. Homes available for sale at the end of April rose 10.5% to 4.55 million, which represents an 11.2-month supply at the current sales pace, up from a 10 month stockpile in March.
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The Case-Shiller index, scheduled to be released on Tuesday, will offer a snapshot of home prices across the country in March. The US Commerce Department will also report that day on sales of new homes in April.
America’s Office of Housing Oversight last week estimated that home prices fell 3.1% in the March quarter, compared to 2007; they also fell 1.7% from the December 2007 quarter. The figure only covers purchases, not refinancings. The agency said the fall was the largest since it started monitoring house prices 17 years ago.
That stockpile of unsold houses (many of which are becoming uninhabitable) is why prices are falling and will continue to do so until something happens to break the cycle. More and more Americans now have negative equity in their houses.
That will put more pressure on prime mortgages, which will in turn put pressure on market values of securities based on those loans, which will generate more write downs and losses.
The strains of the credit crunch may now be easing; the real costs have yet to be met.