The Case-Shiller index of home prices in the United States indicated the biggest drop in 17 months in the year that ended in April 2011, providing additional evidence of a struggling housing market.
The index uses a pool of 20 U.S. cities and calculates price values from April 2010 until April 2011. According to the index, house prices fell by 4% in the year, versus a prior 3.6% and more than the expected 3.9%. On a monthly basis prices fell by 0.1% from March to April this year compared to a prior 0.2%.
The index was created by U.S. economists Karl Case and Robert Shiller, and is based on a three-month average, which means the April data was influenced by transactions in March and February.
A rising inventory of foreclosed homes adds to the risk that home prices will decline even more, which is discouraging to new home builders, which consequently creates a domino effect in the economy by reducing economic growth and recovery. Yesterday, data indicated that US consumer sentiment and personal spending declined in the month of May amid high unemployment rates. Consumer spending accounts for 70% of the economy.
“There’s no sign of any real recovery in housing yet,” Jim O’Sullivan, chief economist at MF Global Inc. in New York, said before the report. “There won’t be a significant turn until the labor market shows sustained improvement. The level of foreclosures is still high and a lot of people are delinquent on their mortgages.”
Following the release of the index, data on US consumer confidence was released, coming out lower than expected in June at 58.5 versus a prior 61.7. Economists predicted an increase of 60.5.
The Dollar fell against the Swiss Franc from a pre-news high of 0.8331 to 0.8285 within an hour.