However, there was better news for the US recovery as official data showed consumer confidence hitting a seven-month high in January.
The US Conference Board said its index of consumer sentiment jumped to 60.6 this month, from 53.3 in December.
However, despite improving economic news, a double-dip in home prices could be confirmed by spring, according to the Standard & Poor’s/ Case-Shiller index, which measures single family house prices in 20 American cities. The index fell by half a per cent in November, following a one per cent drop in October.
While disappointing for the housing market, the drop was less than expected by many economists.
Sixteen out of the twenty cities recorded a drop in November, with the biggest falls in Detroit (-2.3 per cent), Atlanta (-1.7 per cent) and Chicago (-1.6 per cent).
Another survey released yesterday, the FHFA index, recorded month-on-month price stagnation in November. Yet prices fell by 4.3 per cent compared to November 2009, it said.
“We expect softness to persist in the near term as home prices continue to face headwinds from the large pipeline of foreclosures entering the market,” commented Theresa Chen of Barclays Capital.
“However, we expect some of the decline to be offset by increased housing demand.”
Prices were 1.6 per cent lower than in November 2009.
“While prices held a bit better than expected, they are only 1.2 per cent above their crisis low in May 2009, before the homebuyer tax credit started to distort sales and prices,” said ING senior economist Teunis Brosens.
“In eight of the 20 cities, prices are even below the spring 2009 level,” he said.
In spring last year many buyers rushed to beat the end of the homebuyer tax credit.
After the surge, demand collapsed, Brosens said. “The housing bubble has left scars that will remain visible for years,” he said.