Sales of new homes in the United States fell by 8.5 percent in March and home prices continued to decline in what economists see as the worst housing sector slump in decades. VOA's Barry Wood reports that, combined with record increases in fuel prices serves as further evidence of decline in the U.S. economy.
Even worse than the slow pace of sales was the report that average home prices are now 13 percent lower than they were a year ago. It was steepest monthly decline in home prices in over 35 years. Home prices soared in the early part of this decade, peaking in late 2005. They have been falling in most parts of the country ever since.
Mark Zandi, chief economist at Moody's Economy.com, says home prices are likely to fall another 10 percent this year. He says the number of people falling behind in their mortgage payments is on the rise. "You get no sense of any stabilization at all. There are increasing delinquencies..30 day delinquencies, 60 day delinquencies, 90 day delinquencies, 120 day delinquencies are all up," he said.
Zandi told a housing symposium Thursday that a record two million American families are likely to be forced into home foreclosure this year. "The issue now is negative equity. The decline in house prices is so significant that millions of people are now literally under water, meaning that the value of their mortgage debt, when you add it all, is bigger than the house price," he said.
Another speaker, Neriman Behravesh of Global Insight in Philadelphia, says an economy already weak from a housing crisis is also grappling with the debilitating impact of sharply higher oil prices. In addition, there is also the risk of more problems in the financial sector. Banks have been writing down their bad loans but credit markets are still not functioning smoothly.
Behravesh said financial institutions must be transparent in revealing their bad loans. "We need much more transparency. Part of the problem, as I said, is not knowing where the problems were," he said.
The US economy stopped growing at the end of 2007. Since then one quarter million jobs have been lost. President Bush says the economy is merely in a period of sluggish growth. But many economists disagree and say the housing data suggest that a recession - an outright decline - has already begun.