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NEW HOME PRICES IN THE U.S.
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A major source of consumer spending in recent years has been achieved through the increased use of home equity loans as home prices continued to increase at a rapid pace. Thus, consumers were using the increased home value to supplement income for various uses from college expenses for their children, to remodeling their homes, to other large- ticket purchases.
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Also as home prices kept rising and interest rates came down, many
refinanced their homes, which increased their spendable cash. Indeed, given the continued rise in home prices many found they could purchase a home with little or no down payment and often at a sub prime or adjustment interest rate.
This of course came home to roost once home prices stopped increasing.
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Chart 4 shows the average and median price of new homes and the unexpected sharp fall off in the past several months, which put many homeowners under water, increasing foreclosures and adding to the inventory of unsold homes. Home prices in the 4th quarter of 2008 fell at a 13% annual rate that exceeded the fastest rates of appreciation in the bubble years of 2004 and 2005 and median new home prices have fallen by 22% since peaking in 2007.
CGFA Data are yearly average except 2009 which is JAN data.
NEW HOME PRICES IN THE U.S.
1970
75
80
85
90
95
'00
05
2010
0
50
100
150
200
250
300
350
Thousands of dollars
Average Price
Median Price
CHART 4
