An end to the American housing recession, something that many observers regard as essential to ending the credit crunch, seemed little closer yesterday, with US real estate prices falling by the sharpest annual rate ever in July, though the monthly rate of decline is slowing.
The Standard & Poor's/Case-Shiller housing index fell by a record 16.3 per cent in July from the level a year ago, the biggest drop since its inception in 2000. The index covers properties across the 20 largest urban centres in the US. Prices in these areas have plummeted almost 20 per cent since peaking in July 2006. A further fall will see a further rise in the losses faced by the banks on subprime property loans and other mortgages.
Even the fact that the pace of monthly declines is slowing gives little cause for optimism. Anna Piretti, of BNP Paribas, commented: "While house price deflation appears to have moderated in recent months, rising housing foreclosures, the huge overhang of unsold properties still available on the market, ongoing financial troubles and additional expected economic weakness should continue to exert substantial downward pressure on house prices well into next year."
There is "no evidence of a bottom", added David M Blitzer, chairman of the index committee at S&P.
As throughout the housing crisis, property in areas such as Las Vegas is faring worst. There prices plunged by almost 30 per cent on the year, with Phoenix, Arizona diving 29 per cent while Miami, Florida, saw a decline of 28 per cent.
Last week, the National Association of Realtors said the median sales price of an existing home fell 9.5 per cent to $203,100 (£114,275) last month, the largest annual price decline on records dating to 1999. The median home price of a new home fell 5.5 per cent to $221,900 in August, the Commerce Department also reported.
Before the most recent banking crises, Americans confidence in the economy unexpectedly improved in September – but it still hovers near a 16-year low. The optimism of the American consumer was buoyed by the tax rebates issued by the American government in an attempt to stimulate the economy, However it remains about half of what it was a year ago, and, like house prices, seems likely to stay depressed as financial turmoil continues and more jobs in the financial and other sectors disappear.