Just when you thought the US housing market was recovering, S&P/Case-Shiller house price index fell by 4.2 percent in the first quarter of 2011, the lowest its been in 8 years.
Capital Economics says the latest double-dip in housing should come as no surprise. It's very much following a pattern seen in the early 30s, when a brief recovery also petered out. The same has also happened in other big housing busts around the world, the think-tank says. It believes prices are going to fall even further before we hit rock bottom, maybe sometime next year according to MarketWatch.
A backlog of foreclosures poised to reach the market means prices may stay depressed, dissuading builders from taking on new-home construction projects. Unemployment at 9 percent and stricter lending conditions are signs that any recovery in housing may take years.
“With the foreclosure pipeline still full to bursting, it’s hard to see this downward pressure on prices abating,” said Paul Dales, a senior U.S. economist at Capital Economics Ltd. in Toronto. “I wouldn’t be surprised to see prices continue to fall this year and maybe into next year.”
Reports showed consumer confidence unexpectedly declined in May to a six-month low, and business activity in the U.S. cooled more than forecast.
Nationally, home prices decreased 5.1 percent in the first quarter from the same time in 2010, and were down 4.2 percent from the previous three months, the biggest one-quarter decrease since the first three months of 2009. At 125.41, the index was the lowest since the second quarter of 2002.
Sales of previously owned homes, based on closings, fell 0.8 percent in April to a 5.05 million rate, with demand for distressed properties accounting for 37 percent of the total, NAR said last May 19.
The overhang of unsold housing inventory will probably remain an issue for builders and buyers alike. CoreLogic Inc. in March estimated about 1.8 million homes were more than 90 days delinquent, in foreclosure or bank-owned, a so-called “shadow inventory” set to add to the unsold supply of 3.87 million previously owned homes on the market at the end of April.
“We still see housing demand at very weak levels,” Wheat said. “It could still be a struggle in 2012.”