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Us House Prices Decline Continues

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They were expecting them to go up.


The US housing market continued its decline in March as the impending end of the homebuyer tax credit further pressured prices.

Home prices in the Case Shiller 20-city index fell 0.5 per cent on a non-seasonally adjusted basis. The fall was not as steep as it had been in February, when it dropped 0.9 per cent, but was faster than any other month since April 2009. The 10-city index, which contains the majority of the most volatile cities, fell 0.3 per cent.

Detroit – home to the US’s ailing auto industry – and Chicago were the hardest-hit cities, with house prices falling by 4.1 per cent and 2.3 per cent respectively. Californian cities experienced drastically different fortunes in March, with San Diego and San Francisco showing the index’s strongest gains, and Los Angeles extending its declines.

An alternative index on Tuesday also showed prices declined in the first quarter of 2010. The purchase-only housing price index of the Federal Housing Finance Agency (formerly Ofheo) fell 1.9 per cent in the first quarter, compared with the fourth quarter of last year, though the index showed a small gain for March. The index, which, unlike Case Shiller, includes mortgages acquired by Fannie Mae and Freddie Mac, the government-sponsored enterprises, has fallen 13 per cent since its 2007 peak.

The homebuyer tax credit, which was worth up to $8,000 before its April 30 expiry, had breathed some temporary signs of life into the US housing market, helping to boost prices at the end of last year. Prices have resumed their declines but the 20-city index remains 2.8 per cent above their April lows.

Further declines are likely, say analysts. “While a return to month-on-month declines anywhere near the magnitude suffered late in 2008 and early in 2009 is highly unlikely, we do expect mild month-on-month declines to reassert themselves after the strongest effects of the tax credit begin to wane,” wrote Joshua Shapiro, Chief US Economist at MFR.

Home prices, which increased 155 per cent between 2000 and their 2006 peak, have since fallen 31 per cent.

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