In March 2011, home prices in 20 U.S. cities dropped to the lowest level since 2003; indicating the housing market remains stalled in a slump almost two years into the economic recovery. There is a backlog of foreclosures, and when they reach the market it may mean home prices stay depressed, and prevent builders from starting new-home construction projects. Unemployment is at 9 percent and there are stricter lending conditions which are both signs that any recovery in housing may take years.
Nationally, home prices have decreased 5.1 percent in the first quarter from the same time in 2010, and were down 4.2 percent from the previous three months, the biggest one-quarter decrease since the first three months of 2009. At 125.41, the index was the lowest since the second quarter of 2002.
Further declines in home prices are likely to constrain consumer spending which makes up 70 percent of the economy, as homeowners feel less wealthy and have little home equity to borrow against.
Reports earlier this month showed the housing market remains depressed as the broader economy slows.
Pending sales of previously owned homes plunged 12 percent in April from the prior month, the National Association of Realtors said last week. The gauge measures contract signings, which typically lead closings by one to two months, a sign existing purchases will slow.
Sales of previously owned homes, based on closings, fell 0.8 percent in April to a 5.05 million rate, with demand for distressed properties accounting for 37 percent of the total, NAR said last May 19.
The overhang of unsold housing inventory will probably remain an issue for builders and buyers alike. CoreLogic Inc. in March estimated about 1.8 million homes were more than 90 days delinquent, in foreclosure or bank-owned, to add to the unsold supply of 3.87 million previously owned homes on the market at the end of April.