us home prices keep crashing same here soon

US house prices keep on falling at record rates Decrease David Nason, New York correspondent | October 02, 2008
HOUSE prices in the US continue to fall at record rates, raising concerns that a new version of the $US700 billion ($875 billion) Wall Street bailout package to go before Congress this morning will provide only fleeting relief to the world's deeply troubled credit markets.

The Standard & Poor's/Case-Schiller housing index shows prices in July down 16.3 per cent from a year ago in 20 US cities, a record downturn.

The decline in the top 10 cities was an even more alarming 17.5 per cent.

The data was accompanied by a grim Moody's Investors Service forecast that the bottom of the housing slump would not be reached until 2010.

Moody's had previously predicted a bottom by the middle of next year.

"The crisis in the US financial system makes clear that the troubles in the housing market and the broader economy will likely worsen before they improve," Moody's says.

"We believe that some home builders will not survive."

The forecast lends credence to the views of the super bears who say US home prices need to fall another 20 per cent before the housing and credit markets can stabilise.

If that is accurate, then the Wall Street bailout plan conceived by US Treasury Secretary Hank Paulson is unlikely to prevent hundreds of small and medium-sized banks and financial institutions from going under in the months ahead.

Speaking to Congress last week, Paulson said the housing correction was the "root cause" of the US economic crisis because it had resulted in illiquid mortgage-related assets choking off the flow of vitally important credit.

The 100-member Senate will today address Paulson's revised bill, which now contains increased protection for individual bank deposits insured by the Federal Deposit Insurance Corp.

The move is designed to appease House of Representatives members who rejected Monday's first version of the bailout because there was not enough in it for average Americans.

Under the amended bill, the FDIC would guarantee all bank deposits to a threshold of $US250,000, up from the current $US100,000 maximum.

Presidential candidates Barack Obama and John McCain reaffirmed their support for the bailout yesterday and will return to Washington for the vote, which is due at 9.30am AEST.

The US Securities and Exchange Commission will also come to the party ahead of the vote by announcing a review of the controversial mark-to-market accounting rules that have stoked the fires of the credit crisis by compelling huge write-downs on the mortgage-backed securities held by banks and other financial institutions.

Senate majority leader Harry Reid said Democrats and Republicans understood the importance of the legislation, which aimed at restoring confidence in the financial system.

"It is my hope that with the improvements we have made to the administration's proposal, the Senate will pass the legislation," he said.

If it does get through, the bill will return to the House of Representatives later tonight AEST where supporters will seek to overturn Monday's 228-205 no vote. Senate banking committee chairman Chris Dodd said he knew congressmen who were having second thoughts about the no votes they cast on Monday.

With this being a hedge fund redemption week, hedge fund managers will be among the closest observers of the vote.

According to the S&P/Case-Schiller data, the biggest declines in US home values in the year to July were in Las Vegas, Nevada (29.9 per cent), Phoenix, Arizona (29.3 per cent) and Miami, Florida (28.2 per cent). Index committee chairman David Blitzer said there were signs of a slowdown in the rate of decline across the metro areas, but no evidence of a bottom. "Little positive news can be found when cities like Las Vegas and Phoenix report annual declines as large as 29.9 per cent and 29.3 per cent respectively and all 20 cities are still in negative territory on a year-over-year basis," he said.

The repercussions of the US housing and credit market turmoil are now being felt in Europe where five banks -- four European and one British -- required government support to stay afloat on Monday. Ireland, fearing a run on its banks, has announced a blanket guarantee for savings and France also promised new measures to protect depositors. In Russia the stock market was shut for the second time in a month