Page last updated at 14:00 GMT, Tuesday, 26 August 2008 15:00 UK

US house prices 'see record fall'

For Sale sign outside US house
The US housing market shows little sign of improvement

US house prices were down a record 15.4% in the April to June quarter compared with a year ago, according to a closely-watched report.

The decline was recorded by the latest S&P/Case-Shiller survey of US national home prices.

The report said the fact that the falls were nationwide was the latest sign the US housing downturn is continuing.

Separate government data said sales of new homes hit 515,000 in July, up from June, but still near a 16-year low.

Both sets of figures come a day after a study by the main US estate agency body, the National Association of Realtors, said the volume of home sales in July were down 13.2 on the year.

'Mortal enemy'

Housing analyst Gary Shilling said a key problem for the housing market was the oversupply of unsold new homes built during the recent boom years, which he estimated still stood at 1.8 million properties.

It is reasonably encouraging in that it suggests that some parts of the problem are more localised now
Economist David Sloan of 4Cast

"The key point is we are a long way from bottoming out," he said.

"The bulls keep hoping otherwise, but the basic problem is excess inventories. They are the mortal enemy of prices."

However, other analysts were less downbeat, pointing to the fact that the month-on-month rate of house price declines appeared to be slowing.

The fall in May was 0.85%, compared with 1.28% in April and 2.15% in March.

"Prices are still falling but at a progressively lesser pace, this is the slowest decline since last July," said economist David Sloan of 4Cast.

"It seems that some areas are now finding a base. It is reasonably encouraging in that it suggests that some parts of the problem are more localised now."

The S&P/Case-Shiller survey bases its findings on 20 of the largest US cities.

Those that saw the biggest drop in prices from the second quarter of 2007 to that of this year were the sunbelt cities of Las Vegas (-28.6%), Miami (-28.3%), and Phoenix (-27.9%). Falls were also particularly sharp in Southern California, which had previously seen a huge boom.

The least affected city was Charlotte, North Carolina, where prices fell only 1%.

The continuing falls in the housing market are likely to prove a further headache for the banking sector, which has suffered huge losses as the value of its bonds linked to house prices has fallen.

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