NEW YORK // Prices of US single-family homes in October plunged a record 18 per cent from a year earlier, according to the Standard & Poor's/Case-Shiller Home Price Indices released on Tuesday, an indication that the housing market is the throes of a deep recession. Property is critical to the US economy, with a wide-ranging impact from the construction industry to the sale of appliances and furniture, to oil. After hurting economic growth for multiple quarters, a continued deterioration could prolong a turnaround for the world's largest economy, which has been in a recession since late last year.
The composite index of 20 metropolitan areas fell 2.2 per cent in October from September. The price drops, both on a year-over-year and month-over-month basis, came in worse than expectations based on a Reuters survey of economists. S&P said its composite index of 10 metropolitan areas declined 2.1 per cent in October from September for a 19.1 per cent year-over-year drop, also a record. "The bear market continues; home prices are back to their March, 2004 levels." said David M. Blitzer, chairman of the Index Committee at Standard & Poor's.
As of October 2008, the 10-City Composite Home Price Index is down 25.0 per cent from its mid-2006 peak, and the 20-City Composite Home Price Index is down 23.4 per cent, he said. Home sales are going through their worst downturn since the Great Depression as a huge supply of dead stock, tighter lending standards and record foreclosures push down prices. Economists believe the market will not begin to recover until home prices fall far enough to stimulate demand, which has dropped off precipitously as potential buyers stay sidelined.