Home prices in 20 U.S. metropolitan areas fell in March by the most in at least seven years, pointing to weakness in the housing market that will constrain economic growth.
The S&P/Case-Shiller home-price index dropped 14.4 percent from a year earlier, more than forecast and the most since the figures were first published in 2001. The gauge has fallen every month since January 2007.
Prices continue to slide as record foreclosures put more homes on the market and stricter lending standards make it harder to get loans. Falling home values are slowing consumer spending, threatening to halt the six-year expansion.
“Many households are putting their home-buying plans on hold, given the expectations that the house price corrections will persist,” Celia Chen, an economist at Moody’s Economy.com in West Chester, Pennsylvania, said before the report. “The housing downturn remains in full swing.”
Prices dropped 2.2 percent in March from a month earlier, after a 2.6 percent decline in February, 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 variations.
New-home sales in the U.S. unexpectedly rose in April after readings for the prior month were revised down, signaling a worsening housing slump is still a threat to the economy.
Sales increased 3.3 percent to an annual pace of 526,000 from a 509,000 rate the prior month that was the lowest in 17 years, the Commerce Department said today in Washington. A separate report today showed home prices dropped in the first quarter by the most in at least 20 years.
Concern about declining home values and stricter loan rules are limiting demand and foreclosures are throwing even more properties on the market. Federal Reserve policy makers view the prospect of larger decreases in house prices and the effect that would have on financial institutions as a “key source” of risk to growth.
“There’s certainly more room for declines in home sales,” Adam York, an economist at Wachovia Corp. in Charlotte, North Carolina, said before the report. “People will be reluctant to buy, lenders will be reluctant to lend. We don’t think a leveling out in the housing market is coming anytime soon.”