U.S. home prices declined in the 12 months through July as concerns that the economy may enter another recession sapped the confidence of would-be buyers.
Prices dropped 3.3 percent, the Federal Housing Finance Agency in Washington said in a report today. Compared with June, they rose 0.8 percent, more than the 0.1 percent gain that was the average estimate in a Bloomberg poll of 15 economists.
Americans are becoming more pessimistic about the economy after growth weakened in the first half of the year to its slowest pace since the recovery began. The unemployment rate has stayed above 9 percent for more than two years, with the exception of slight dips in February and March. The median income for U.S. households dropped in 2010 to the lowest level since 1996, according to a Census Bureau report this month.
“There’s a lack of confidence among homebuyers that is directly tied to the fact that people are worried about their jobs,” said John Burns, founder and chief executive of John Burns Real Estate Consulting in Irvine, California. “You can’t get a home if you don’t have income.”
Home prices in July fell the most in the region that includes Nevada and Arizona, slumping 6.9 percent from a year earlier, the FHFA said. They decreased 6.7 percent in the area that includes California.
Decline in Value
Five years into the housing crash, U.S. residential real estate has lost $6.6 trillion in value, as measured by the Federal Reserve. The FHFA index, based on home purchases financed by Fannie Mae and Freddie Mac, has tumbled more than 18 percent from its April 2007 high. Other price measures, such as the S&P/Case-Shiller index, have fallen even more because they include foreclosures that investors usually purchase with cash.
The Organization for Economic Cooperation and Development earlier this month slashed its forecast for U.S. economic growth in the second half of 2011, citing gridlock over fiscal policies and falling consumer confidence. Gross domestic product probably will increase 1.1 percent in the third quarter and 0.4 percent in the fourth, down from the 2.9 percent and 3 percent expansion that the Paris-based international economic research group predicted in May.
That would put the second half of the year on par with the first, when gross domestic product expanded at a 0.4 percent annualized rate in the first quarter and 1 percent in the second.
Median Price Drops
The median U.S. price for a previously owned home sold in July was $171,200, according to National Association of Realtors data. In August, it fell to $168,300, the trade group said yesterday in a report. Sales last month rose to 5.03 million at an annual pace from a 4.67 million rate in July.
Builders broke ground on new homes at the slowest rate in three months in August, the Commerce Department said in a Sept. 20 report. Housing starts dropped 5 percent to 571,000 at a seasonally adjusted annual pace.
Homebuilding companies have lost more than a quarter of their value this year as an oversupply of existing homes dilutes demand. New-home sales probably will drop to 307,000 this year, according to a Sept. 12 forecast by Mortgage Bankers Association in Washington. That would be the fewest in almost half a century of government data.