Housing market woes continue

By Dave Hannon -- Purchasing, 4/30/2008 11:59:00 AM

As the U.S. economy struggles to decide if it’s going into a full-blown recession, the bad news for the housing market continues to pile up.

U.S. home prices in 20 major cities trended down 12.7% in the 12 months ending in February, according to the S&P/Case-Shiller Home Price Index released Tuesday by Standard & Poor's.

The monthly Case-Shiller report comes on the heels of news that U.S. foreclosure filings in the first quarter jumped 23% to a new high while the Census Bureau reports the number of vacant homes on the market also hit a record. Spending on residential construction plunged 26.7%, the ninth straight quarterly decline and the biggest for any three months since the end of 1981.

The continued housing slump has dramatically slowed demand for building materials, as reflected in the financial results of building materials makers like Saint Gobain and USG, which has shut down more than 3.5 billion square feet of wallboard manufacturing capacity in the last seven quarters. Earlier this month, Canadian lumber producer Canfor said it will cut lumber production this year by 600 million board feet.

Despite news this week that Congress may get a housing and mortgage aid package to President Bush as early as July, most market watchers say the downward housing spiral shows now sign of slowing. “Month-to-month, it gets consistently worse," said David Blitzer, chairman of the Case-Shiller index committee at Standard & Poor’s in an Associated Press report. "The slope is one direction. There is no sign of a bottom."

"I'm more convinced that we haven't seen the peak of foreclosure activity yet, and the wave probably won't crest until late third or fourth quarter of 2008," said Rick Sharga, vice president of marketing at RealtyTrac in a Reuters report.

“Once the market starts in a given direction, the momentum will carry it down, even below the (historic) trend line, until something happens to change the overall psychology," said Jim Gaines, a research economist at Real Estate Center at Texas A&M University.