While the U.S. economy is recovering, it is generally agreed that full health will not be restored until the housing sector turns around. That’s why the numbers on U.S. home starts, sales and prices are of such interest to economists and other analysts.

While new home starts and single-family home sales improved mildly in the latest month, prices performed pretty much as expected. That is to say, they fell again in the existing homes market, according to S&P Case-Shiller.

In February 2011, both the 10-city and 20-city composite indices pulled back 0.2% month to month and seasonally adjusted (-1.1% not seasonally adjusted). That left them -2.6% and -3.3% year over year respectively.

Over the last couple of months, U.S. resale home prices have been headed back down after a period of mild improvement in mid-2010. But that was when a rather large tax incentive for first-time homebuyers was augmenting demand.

Since the expiry of the tax break, the market has become distressed again. The levels of the indices have fallen to the point where they are only slightly above their April 2009 troughs.

Washington, D.C. was the only major city in the country to record a year-over-year gain in home prices in February, at +2.7%. There are advantages to being a government town.

It is shocking to realize that four U.S. cities are currently recording home prices below their levels in the year 2000 – Detroit, Las Vegas, Cleveland and Atlanta.

On average, U.S. home prices have now retreated to 2003 levels. Versus their peaks in June-July 2006, the 10-city and 20-city composite indices are -32.5% and -32.6%.

For foreigners looking at opportunities in the U.S. housing market, it isn’t just a matter of the price drops. A consideration of currency shifts also needs to be factored in. In many cases, the bargains seem unbelievable.

The U.S. dollar reached its peak internationally on March 3, 2009. That was in the darkest days of the financial crisis.

At that time, investors were fleeing risky investments and seeking security in the world’s only true reserve currency.

Since then, the greenback has declined against every other major currency. Some of the most dramatic drops have been as follows: compared with the Australian dollar, -33%; Brazilian Real, -30%; Canadian dollar, -23%; Swiss franc, -20%; Japanese yen, -16%; Mexican peso, -16%; Indian rupee, -12%; British pound, -11%; and euro, -6%.

Even versus the Chinese yuan, the American dollar has fallen 4% since early March 2009.

Interest by foreign investors in U.S. distressed homes should be helping to provide some measure of stability on the price front. This effect appears to have been only minimal so far.

Certainly foreign buyer interest has played a role in Canadian home prices. The media is fond of pointing out how Vancouver home prices, which are far higher than anywhere else in the country, are receiving a boost from wealthy Chinese purchasers.

March’s average resale home price in Vancouver was 72% higher than in Toronto, according to the Canadian Real Estate Association (CREA). There has been an influx of wealthy individuals and families from Southeast Asia under what is termed “immigrant investor” status.

To qualify, applicants must have a net worth of $1.6 million and make an investment of $800,000. Vancouver has become home to about half the number of such new arrivals in Canada.

The decline in value of the U.S. dollar has made U.S. goods exports cheaper and more attractive, helping to provide jobs in manufacturing and tourism/accommodation.

The improvement in the jobs market in the U.S. (+216,000 in March) has helped lift consumer confidence. In April, after a marked decline in March, the U.S. Conference Board’s consumer confidence index rose to 65.4. The month before, it was 63.8.

Consumers’ assessment of current conditions improved for the seventh straight month in April.

However, most of the improvement in the index came from lower percentages of survey respondents expecting business and labour market conditions to worsen over the next six months. One would prefer to see a significant pick-up in the numbers expecting improvement.

The Conference Board’s index is based on 1985=100. The value of the index hovered near 100, with little variation, from 2004 through most of 2007, while the economy’s engine was purring nicely.

During the worst of the U.S. recession, which lasted from early 2008 through mid-2009, the index value plummeted. It hit a rock bottom 25.3 in February 2009.

http://www.reedconstructiondata.com/construction-forecast/news/2011/04/u.s.-home-prices-continue-their-slide-but-confidence-improves/

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