US home prices slumped for an eighth straight month in March, dropping below the bottom previously recorded in the housing bust in a sign of the persistent weakness of residential real estate.

A separate report showed consumer confidence sagged in May as Americans grew more pessimistic about the job market and inflation expectations rose.

Prices of single-family houses in the 20 largest US cities fell 0.2 per cent from February to March on a seasonally adjusted basis, according to the S&P/Case-Shiller home price index. The decline was in line with economists’ expectations and left the index at 138.16, below its low point of 139.26 in April 2009 and the lowest level since March 2003. Prices were 3.6 per cent below their level of a year ago, a bigger dip than the 3.4 per cent expected.

“This month’s report is marked by the confirmation of a double-dip in home prices across much of the nation,” said David Blitzer, chairman of S&P’s index committee. “Home prices continue on their downward spiral with no relief in sight.”

Even as the wider economy has maintained a steady, if sluggish, recovery, the housing market has lagged behind, weighed down by an oversupply of homes for sale and difficult borrowing conditions for many homeowners. The glut of distressed homes, which often sell for as much as a 20 per cent discount, has sapped confidence and depressed prices, discouraging buyers and sellers alike.

Prices fell in 13 of the 20 cities surveyed in March, and 12 cities recorded the lowest levels of the current cycle. Washington was the only city where prices rose during the month and over the past year.

In the first quarter of 2011, S&P/Case-Shiller’s national index of home prices fell 1.9 per cent on a seasonally adjusted level, leaving prices at their levels of mid-2002, the report said. On an unadjusted basis, prices sank 4.2 per cent in the quarter and were down 5.1 per cent from the first quarter of 2010.

“The rebound in prices seen in 2009 and 2010 was largely due to the first-time home buyers tax credit,” Mr Blitzer said. “Excluding the results of that policy, there has been no recovery or even stabilisation in home prices during or after the recent recession. Further, while last year saw signs of an economic recovery, the most recent data do not point to renewed gains.”

With prices and interest rates so low, however, affordability is at a record high, said Kurt Karl, chief US economist at Swiss Re. “People should be starting to buy late this year and early next year,” he said, adding that household formation is running at about 1m new households a year. “That’s not nothing and they all need to live somewhere,” he said,

The home price data followed a gloomy report last week from the National Association of Realtors, which said the number of Americans signing contracts to buy previously owned homes plunged 11.6 per cent in April – far greated than the 0.9 per cent fall expected by economists. Earlier last week a commerce department report showed the supply of new homes for sale fell to a record low as builders slowed construction as buyers opted for cheaper and more plentiful previously owned houses and properties in foreclosure.

Separately, the Conference Board’s index of consumer confidence slumped to 60.8 in May from an upwardly revised 66.0 in April, missing expectations of a rise to 66.6.

“Consumers are considerably more apprehensive about future business and labor market conditions as well as their income prospects. Inflation concerns, which had eased last month, have picked up once again,” said Lynn Franco, Conference Board director.

Consumers’ evaluation of the present situation decreased slightly to 39.3 from 40.2, but their expectations dropped sharply to 75.2 from 83.2, signalling a worsening outlook.

“Overall a bad report signalling that the consumer recovery in the US is still suffering from the high commodity prices and the apparent loss of momentum in the labour market recovery,” said David Semmens, US economist at Standard Chartered.

The number of people who said jobs are “hard to get” rose to 43.9 per cent from 42.4 per cent, although the number of people who said jobs are “plentiful” also rose to 5.6 per cent from 5.1 per cent.

Fewer people expected more jobs to become available in the months ahead, with the proportion dropping to 15.9 per cent from 17.8 per cent, while the number of people expecting fewer jobs in the coming months rose to 20.8 per cent from 18.7 per cent.

Expectations for inflation in the year ahead rose to 6.6 from 6.3 percent, the report said.

Analysts watch consumer confidence sentiment closely as a predictor of spending, which makes up about 70 per cent of gross domestic product. Last week, the government said consumption growth in the first quarter was weaker than initially estimated, leaving headline growth unchanged from an initial reading of 1.8 per cent.

High petrol prices in recent months have sapped spending on other items, denting confidence, Mr Karl said. But as oil prices stabilise, “that would mean that confidence should go up because instead of prices rising at the pump they should stay the same.”

Kaynak: Financial Times

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