Alarming slump in property market threatens US recovery
The US property market is threatening to undercut the Obama administration's stimulus-driven economic recovery after home sales resumed their record slide following the end of a government homebuyer tax credit.
New-house sales tumbled 33% last month to a record low annual pace of 300,000, the Commerce Department confirmed in an alarming report yesterday.
Sales of second-hand houses unexpectedly fell 2.2% in May, even as mortgage rates remained near an all-time low.
The end of the tax credit in April is putting a strain on a market still hurting from the worst housing collapse since the Great Depression. Foreclosures may reach 1.9 million this year after a record two million in 2009, according to Mark Zandi, chief economist at Moody's Analytics.
It would take more than eight months to sell all available 3.89 million existing homes, theNational Association of Realtors (estate agents) said.
“We're going to see a homesales air pocket after the end of the tax-credit stimulus,” said Richard DeKaser, a former economist at the US Bureau of Economic Analysis. “That means housing will be a drag on third-quarter economic growth.”
“If there is a sharp decline not only in housing sales but in housing prices, that could threaten a recovery,” said Susan Wachter, a real estate professor at the University of Pennsylvania's Wharton School in Philadelphia.
The median US home price slid 29% to an almost eight-year low of $164,600 (€134,000) in February, from a peak of $230,300 in July 2006, according to data from the Realtors group. Prices will drop 3.6% this year, after falling 4.5% in 2009, the Mortgage Bankers Association estimates.