April 23, 2008 | posted by Michael Baxter in US economy |

Look, one swallow doesn’t make a summer, and all that, but house prices – or at least existing homes, actually rose in the US last month.

The headline figures are not so good, though. The median price of existing homes across the US is 7.7 per cent down on last year, and sales are now 19.3 per cent down, but even so, good news on US house prices is so rare that we should perhaps make the most of this small glimmer.

According to the National Association of Realtors the median price of existing homes in the US in March was $200,700, compared to $195,600 in February.  The year high was $229,000, a full 12 per cent up on the March price, however, so, even if prices stay flat for the next three months, the annual fall will still be alarming.

Furthermore, there are supposedly 9.9 months of supply of existing houses for sale – so although the March rises were nice to see, don’t expect a repeat any time soon.

The real question, surely, is how much further have prices got to fall.  According to the IMF, although US house prices are overvalued – actually in comparison with other countries, the overvaluation Stateside is quite modest – around 10 per cent.    In fact the IMF had the level of overvaluation higher in Ireland, Netherlands, UK, Australia, France, Norway, Denmark, Belgium, Spain, Sweden, Italy and Spain.

But now Robert Shiller, the economics professor from Yale University who lent his name to the closely watched Shiller index, has said he believes US house prices could fall by 30 per cent, or even as much as 45 per cent, in total.  Speaking yesterday, after drawing a comparison with the 30 per cent fall seen between 1925 and 1933 said, “I think there’s a good chance we’ll exceed that this time.”

By contrast, the National Association of Realtors has long been predicting only modest falls in prices.

Although Professor Shiller’s words seem too pessimistic in the extreme, it does seem curious he believes US prices will fall so far, when the IMF seems to think US prices are only in the region of 10 per cent too high. 

One thing is for sure, with the median price of an existing home in the US translating to the equivalent of around £100,000, most British first time buyers would love it if average prices in Blighty were so low.