United States house prices saw their biggest year-on-year fall in 16 years in August, a national index showed on Monday, with some economists predicting a record annual fall by the year end as turmoil continues in the housing market.
The figures came as the former US Federal Reserve chairperson Alan Greenspan warned of further difficulties as builders struggled to sell their rising stock of housing.
Standard & Poor/Case Shiller’s home price index of existing Âsingle-family homes showed a 0,8% drop in August compared with July across 10 metropolitan areas, to 214,35. Prices have fallen for eight consecutive months, with the decline getting larger each month. The year-on-year decrease in the price index is now 5%, the biggest drop since April 1991, when it was 6,3%.
“The fall in home prices is showing no real signs of a slowdown or turnÂaround,” said Robert Shiller, founder of the index and chief economist at MacroMarkets LLC. “Things could get worse.”
Economists at investment bank Goldman Sachs say prices are likely to register a record 7% annual drop by December.
Meanwhile the broader S&P index of 20 metropolitan areas showed an annual fall in August of 4,4%, with eight areas recording their largest-ever annual falls. Tampa, Florida, led the way with a 10,1% fall, followed by Detroit with 9,3%. San Diego, Miami and Washington DC were other big losers.
These were formerly at the forefront of the five-year US housing boom, in which prices reached record levels. These regions were hugely dependent on so-called “jumbo sub-prime” mortgages — loans which were more than $417 000 and have now dried up as a result of the credit crunch.
House prices affect consumer confidence and there is concern that the deterioration in the housing market will spill over to the wider economy by hitting consumer spending and increasing unemployment.
Against the backdrop of limited availability of credit, there are fears that the US economy may slip into recession. — Â