US House Price Index Strongly Down

The price of homes in the US’s top ten largest cities has fallen over the course of July by the steepest margin in nearly two decades, according to a survey published today, reflecting the growing depression in the US housing sector that has so badly plagued its economy in recent years.

The figures, derived from the S&P/Case-Shiller house price index saw the price of homes in the top ten largest US cities, on average, fall by around 4.5% over the year to July, reflecting a drop of 0.6% on the month.

The US housing market has been the source of most of the significant problems for the US economy over the last few years. Excessive building of new properties beyond demand has created a buyers market for homes, whilst the collapse of the sub-prime sector has seen consumers and investors alike feel the brunt of the credit crunch environment and higher lending rates.

Analysts have suggested that a lack of demand and excessive supply stock of housing has driven prices down on the whole, whilst current market conditions continue to put potential home-buyers off taking the first step onto the property ladder.

The Federal Reserve’s decision to cut interest rates by a half a percent last week should be sufficient to help encourage some growth in housing demand over the coming months, as credit becomes cheaper and the cost of variable mortgage lending decreases.

However, with the credit crunch still in full effect, borrowers with less than perfect credit histories are finding themselves facing tougher opposition to finance, particularly in the home buying/mortgage market which has been the direct source of much of the unrest in recent months.

Analysts have predicted that, in line with this data, there is a significant risk of a recession in the US over the course of 2008, a view that is now becoming more widely held across the US and the world.

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