US House Price Slump

The decline of the US housing market continued with house prices falling 10% in the last month.

The house price falls are due to  excess supply, falling consumer confidence and a correction to the inflated house prices. There are worrying signs that US house prices have further to fall because the stock of unsold houses is still large. Also the financial turmoil in the credit markets means that the number of mortgage products on offer is decreasing. The cost of mortgages is also rising because of the difficulty of raising finance. This will reduce demand for houses.

There is also the concern that with house prices falling so much people will be deterred from buying because of the danger of negative equity.

However, it is worth remembering that many still buy houses to live in rather than an investment. Also the cut in interest rates from 4.25% to 2.25% should help improve conditions in the housing market in the coming months.