Wednesday, Oct 1, 2008
House prices in 20 U.S. cities declined in July at the fastest pace on record, signaling the worst housing recession in a generation had yet to trough even before this month’s credit crisis.
The S&P/Case-Shiller home-price index dropped 16.3 percent from a year earlier, more than forecast, after a 15.9 percent decline in June. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.
The housing slump is at the center of the meltdown in financial markets as declining demand pushes down property values and causes foreclosures to mount. Banks will probably stiffen lending rules even more in coming months to limit losses, indicating residential real estate will keep contracting and consumer spending will continue to falter.
(Article continues below)
“The fact that house prices quickened their slide before the worst point in credit markets hit this month does not bode well,” said Derek Holt, an economist at Scotia Capital Inc. in Toronto.
Home prices decreased 0.9 percent in July from the prior month after declining 0.5 percent in June, the report showed. The figures aren’t adjusted for seasonal effects so economists prefer to focus on year-over-year changes instead of month-to-month.