US home prices fall to new lows in first quarter this year

29 May 2012 19:44  [Source: ICIS news]

WASHINGTON (ICIS)--US home prices fell to new lows in the first quarter of this year, Standard & Poors (S&P) said on Tuesday, casting fresh doubt on earlier data reports suggesting that the long-troubled housing industry might be headed for recovery.

S&P said that its closely watched survey of nationwide housing prices, based on work by economists Karl Case and Robert Shiller, shows that all three major indices of home prices “ended the first quarter of 2012 at new post-crisis lows”.

The three major indicators of housing price movements include a ten-city composite, a 20-city average and an overall national composite index of prices for single-family homes.

“The S&P/Case-Shiller national home price index, which covers all nine US census divisions, posted a 1.9% decline in the first quarter of 2012 over the first quarter of 2011,” S&P said.

S&P said that its key national composite index of home prices “fell by 2% in the first quarter alone and is down by 35.1% from its second quarter 2006 peak”, the point at which the US housing bubble started to collapse and housing prices went into a nose-dive.

David Blitzer, chairman of S&P’s indexes committee, said that “While there has been improvement in some regions, housing prices have not turned”.

The housing industry, especially new home construction, is a major downstream consuming sector for US chemicals and plastics manufacturers.

The S&P home price survey results come in the wake of other data reports suggesting that the long-depressed US housing industry might at last be in the first stages of a recovery.

Last week, the Commerce Department said that new home sales jumped by 3.3% in April from March. And earlier this month, US home builders expressed some renewed confidence in the market for new single-family homes.

Pending home sales rose in March, prompting the National Association of Realtors (NAR) to declare that “the housing market has clearly turned the corner”.

However, with S&P indicating that US home prices continue to slide, expectations for a housing market recovery may be premature.

With home prices in continuing decline, builders may find it difficult to construct new homes and sell them at prices that will cover their costs.

Declining home prices also make it more difficult for builders to get project development loans and for would-be buyers to get mortgage financing.

In addition, declining real estate prices put more existing homeowners at risk of default as the value of their homes sink below the mortgage debt on their properties.

And with home prices in decline, potential buyers of new or existing homes may be discouraged from making a purchase for fear that any property they acquire could begin to lose value immediately.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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