Prices of single-family homes in October plunged a record 18 per cent from a year earlier, according to the Standard & Poor’s/ Case-Shiller Home Price Indices released yesterday that indicated a US housing market in the throes of a deep recession.
The battered housing market is critical to the economy, with a wide-ranging impact from the construction industry to the sale of appliances and furniture.
After hurting economic growth for multiple quarters, a continued deterioration could delay a turnaround for the world’s largest economy, which has been in a recession since late last year.
The composite index of 20 metropolitan areas fell 2.2 per cent in October from September. The price drops, both on a year-over-year and month-over- month basis, came in worse than expectations based on a Reuters survey of economists.
‘The bear market continues; home prices are back to their March 2004 levels,’ Mr David M. Blitzer, chairman of the Index Committee at Standard & Poor’s, said in a statement.
As of October, the 10-City Composite Home Price Index is down 25 per cent from its mid-2006 peak, and the 20-City Composite Home Price Index is down 23.4 per cent, he said.
The United States housing market is in the worst downturn since the Great Depression, as a huge supply of unsold homes, tighter lending standards and record foreclosures push down home prices.
Economists believe the US housing market will not begin to recover until home prices fall far enough to stimulate demand, which has dropped off precipitously as potential buyers stay sidelined.
Separately, consumer confidence fell to a record low this month as the worst job market in 16 years hammered sentiment, the Conference Board said yesterday.
The business research company said its Consumer Confidence Index fell to 38 this month from a slightly downwardly revised 44.7 last month.
The median forecast of economists polled by Reuters was for a reading of 45. Their 62 forecasts ranged from 40 to 51.1.
At the same time, business activity in the Midwest continued to shrink this month but at a less severe rate than expected, and input prices fell sharply, a report showed yesterday.
‘The further erosion of the Consumer Confidence Index reflects the rapid and steep deterioration of economic conditions that occurred in the fourth quarter of 2008,’ said Ms Lynn Franco, director of the Conference Board’s Consumer Research Centre.
‘The overall economic outlook remains quite dismal for the first half of 2009, and only a modest recovery is expected in the second half.’
Chief among consumers’ woes has been spiralling job losses in recent months.
US employers axed 533,000 jobs from payrolls last month alone, the most in 34 years, according to Labour Department data released earlier this month.
Meanwhile, the Institute for Supply Management-Chicago business barometer rose to 34.1 from 33.8 last month. Economists had forecast the index at 33. A reading above 50 indicates expansion while a reading below 50 indicates contraction.
Source : Straits Times - 31 Dec 2008
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