Home Prices Continue to Slide in the U.S. and Europe

Home prices continue to slide in both the U.S. and in Europe. Indeed, home prices in the U.S. slid 14% on the year, according to the Financial Times. Recovery is expected to move slowly, thanks to these housing declines. Home price declines affect the equity in homes, meaning that fewer people can use them to shore up their finances. Additionally, construction investment is declining thanks to these issues. This leads lower confidence and less money circulating in the markets.

Another issue, reports the Financial Times, is the fact that banks — already troubled — will have to deal with the burdens of more painful mortgage defaults:

“Falling house prices do not necessarily mean there’ll be more [mortgage] defaults,” said Dirk Schumacher, an economist at Goldman Sachs in Frankfurt.

“But the defaults that will come could be more costly for the banks.”

In the end, home prices will need to pick up if the economy is to recover. Along with employment, the housing market is one of the most important aspects of economic recovery.