Home Prices Fall, Delaying Construction Industry Recovery

Apr 27th, 2011 | By | Category: Business and Finance

Housing prices from March 2010 to February 2011 fell the most in a year, according to data released Tuesday by S&P Indices for the monthly S&P/Case-Shiller Home Price Indices report. The decline is the largest over a twelve-month period since 2009 and brings housing prices near the six-year low reached in April 2009. Analysts predict this will further delay the recovery of the construction industry, already lagging behind other segments of the economy that are recovering faster.

B94 House 300x201 Home Prices Fall, Delaying Construction Industry RecoveryThe S&P/Case-Shiller index showed property values in 20 cities falling 3.3 percent since February 2010 to an index level of 139.27. This was barely above the 139.26 level reached in April 2009.

Experts predict values will continue falling as long as foreclosures continue increasing the supply of unsold homes. The decreased sale of homes translates into decreased demand for construction, delaying the recovery of the construction industry sector.

Meanwhile, however, increased consumer confidence and employment are pushing the stock market up, which also tends to affect the price of homes and construction. Strong performance by companies like United Parcel Service and 3M pushed the Standard & Poor’s 500 Index up 0.9 percent to 1,347.24 in New York at closing time. This brought the stock market to its highest peak since June 17, 2008. Treasuries were also up, with the yield on the benchmark 10-year note falling to 3.31 percent from 3.37 percent late Monday.

But an increasing proportion of consumer spending is going towards food and gas, which are at their highest levels in almost three years. Experts say there will need to be some changes to the mortgage financing system before increased spending will carry over into the housing industry. Speaking to the Council on Foreign Relations Tuesday, Treasury Secretary Timothy Geithner said that fixing the housing market will require increased financing and mortgage support from private capital sources to replace the role of government-sponsored agencies.

“You have to put in place a housing-finance system that will allow private capital to carry the dominant role of financing and mortgage for people,” Geithner said.

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