US house prices rose 3.2 per cent on average in the second quarter from a year ago, representing the slowest appreciation in a decade, the Office of Federal Housing Enterprise Oversight said yesterday.
Compared with the first quarter of 2007, house prices increased by 0.1 per cent, the smallest rise since the last part of 1994, the regulator of home finance companies Fannie Mae and Freddie Mac said on its website.
Slowing home price appreciation has fuelled speculation the housing slump may inhibit growth to the point of recession.
Downward pressure on house prices is likely to continue well into 2008, given the soaring numbers of homes for sale and a sharp reduction in credit by lenders in recent months, economists said.
The figures came as other data showed strong business investment and higher exports drove the US economy ahead at a robust 4 per cent annual rate in the second quarter - before the turmoil in credit markets struck.
The department of commerce yesterday boosted its initial estimate of second-quarter growth in gross domestic product from the 3.4 per cent it estimated a month ago.
While the second-quarter pace was the fastest since the start of 2006 and eclipsed the first quarter's anaemic 0.6 per cent rate, analysts said growth has peaked and will slow sharply in coming quarters.
"It was nice to see that strong growth in the spring," said Joel Naroff of Naroff Economic Advisors, "but that is history and the credit problems . . . imply the third quarter could be extremely slow."
On another ominous note, the department of labour said new claims for jobless benefits unexpectedly rose last week, and the number of unemployed still on benefit after drawing an initial week of aid was the highest since mid-April.
"There must now be a real suspicion that companies have started to recognise that maintaining earnings growth in the current environment will be difficult with their current staffing levels," economists at High Frequency Economics wrote in a note to clients.
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