The deterioration in the US housing market is accelerating, new figures showed yesterday, and at a faster rate than Wall Street had been expecting.
With the number of house sales in April down 2.6 per cent on the same month last year, the average selling price for homeowners who do find a buyer has started to fall. And the data contained little evidence to support the economic optimists who argue that the worst is almost over, since the backlog of unsold homes also climbed.
Analysts blamed the worsening figures on the so-called "sub-prime" mortgage market, which has effectively dried up. Mortgage companies have sharply curtailed their lending to Americans with poor credit histories, after rising arrears sent several lenders into bankruptcy and attracted the attentions of politicians, who are investigating unscrupulous lending practices.
The National Association of Realtors said that the annual rate of second-hand house sales was 5.99 million in April, down 2.6 per cent and significantly below the 6.18 million that had been expected. The worst drop in activity was in the North-east, where sales were down 8.8 per cent. Across the country, the price of the average US home was $220,900 (£111,300) last month, down 0.8 per cent from $222,600 in April 2006.
The backlog of unsold homes at the end of April was 4.20 million, 8.4 months of supply at the current sales pace. There was a 7.4-month supply at the end of March. The figures were bad enough to dent the rally in an otherwise bullish day on Wall Street, where share prices were rising on expectations of continuing strength in the broader US economy. The Dow Jones Industrial Average fell in the minutes after the data was released, although it resumed its climb.
Car Leahey, an economist at Decision Economics, in New York, said: "This report tempers the new-found hope that some analysts had that the housing recession might be over. Forecasts of a better housing market later this year may turn out to be right, but I would be very suprised if you see the old-fashioned V-shaped housing recovery, in part due to the overhang of homes and the coming foreclosures in the subprime mortgage market."
Yesterday's figures snuffed out the little optimism generated on Thursday when figures on the sale of newly built homes suggested a pick-up in activity. Sales had surged in April, rising by 16 per cent on a seasonally adjusted basis, but critics pointed out homebuilders had needed to slash prices to sell their wares.
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