American House Prices Continue To Fall

The American average existing-house price for all housing types was $170,300 (£121,900) in January, down 14.8 percent from a year earlier. A high prevalence of distressed house sales, and of those in lower price ranges has skewed the average price to be markedly lower than under normal market conditions.

American house sales also declined in January with some buyers waiting to see how details of the economic stimulus package would affect them. At the same time, inventories fell to a two-year low.

Lawrence Yun, National Association of Realtors (NAR) chief economist, said there was understandable hesitation by some house buyers. “Given so much stimulus package discussion in January, some would-be buyers simply sat out for clarity and certainty on the nature of housing stimulus,” he said. “The housing market will soon get a lift from very favourable buying conditions – not only from improved affordability, but also from the stimulus of an $8,000 first-time home buyer tax credit, and higher conforming loan limits that will allow more people to tap into 50-year low mortgage rates.”

NAR estimates the impact of the stimulus package and lower interest rates on the housing market to be about 900,000 additional house sales in 2009 compared to conditions before the stimulus package. Inventory is expected to fall below an 8-month supply by the year end, which would be consistent with house price stabilisation.

Yun said it will take a while for the stimulus to show in housing data. From the time a buyer starts looking for a home until it is reported as a closed sale can take as long as five months: a median of 10 weeks to search and make an offer, about 6 weeks to close the transaction and up to 4 weeks to collect and report the data. “This means improvement from the economic stimulus isn’t likely to show as closed home sales before summer, although we may see an earlier lift from lower mortgage interest rates,” he said.

Significant local market variations continue. “A majority of markets experienced sales declines of more than 20 percent from a year ago, but some markets appeared to have reached the tipping point of accelerating home buying,” Yun said. “For example, home sales in Las Vegas have more than doubled with some reports of multiple bids.”

Regionally, existing house sales in the Northeast were 23.8 percent lower than January 2008. The average house price in the Northeast was $228,200 (£163,400), down 14.7 percent from a year ago.

Existing house sales in the Midwest were 16.7 percent below a year ago and the average house price in the Midwest was $138,100 (£98,900), which is 6.8 percent lower than January 2008.

In the South, existing house sales were 15.9 percent below January 2008. The average house price in the South was $152,100 (£108,900), down 7.4 percent from a year earlier.

Existing house sales in the West were unchanged from December and were 29.0 percent stronger than a year ago. The average house price in the West was $220,000 (£157,500), which is 25.5 percent below January 2008.

exchange rate used £1 = $1.397