US housing market shows signs of slowdown

US housing market shows signs of slowdown

WASHINGTON - U.S. house prices grew at their slowest pace in the second quarter of the year, according to data released by the government. The Office of Federal Housing Enterprise Oversight said that house prices grew at an annual rate of 4.7 percent in the quarter, their slowest rise since the fourth quarter of 1999.

House prices grew at 8.8 percent in the first quarter and followed a maximum gain of 17.8 percent in the third quarter of 2004, the report said. "These data are a strong indication that the housing market is cooling in a very significant way," said James Lockhart, OFHEO director. "Indeed, the deceleration appears in almost every region of the country."

The average gain for the three months ending June was 1.17 percent compared with 3.65 percent in the second quarter of 2005. The new report said this was the biggest decline since records began in 1975. OFHEO said that home prices were up by 10.8 percent on a yearly basis as compared to the 12. 8 percent gain in the first quarter.

The housing market has contributed significantly to the US economy over the last four years. Consumers have been able to borrow huge amounts thanks to the rising values of their homes. If the market slows down it could adversely affect the economy, analysts said. "We look for home price inflation to continue to decelerate with prices flattening by year end," said Drew Matus, an economist with Lehman Bros. "This is consistent with our outlook for a 'bumpy' landing in the housing market."