What me worry?
US house prices are in a double dip that has erased all of their bounce since the recession and threatens to derail a stuttering economic recovery.
The S&P/Case-Shiller house price index fell by 4.2 per cent in the first quarter of 2011, breaking through a 2009 low to hit its weakest level since 2002.
Declining house prices may cause households to rein in both consumption and home buying plans, leading to further falls in house prices and overall weakness in the economy.
House prices are now 33 per cent below their peak in 2006 – a sharper fall than the 31 per cent drop recorded during the Great Depression, according to analysts at Capital Economics.
Prajakta Bhide, an analyst at Roubini Global Economics in New York, reiterated a forecast of a year-on-year fall in house prices of about 8 per cent for 2011, but said that “we have to be worried about prices overshooting on the downside”.
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