March 29th, 2011

Housing: Concerns of a double-dip mounting



5-price-reducedAlmost two years ago I wrote a post titled “Home prices: The statistic that matters most?” It was June 2009 and we were at a point where home prices had fallen every month since July 2006. Everyone seemed well aware of just how instrumental home-price recovery would be in leading us out of the recession and back towards recovery and regrowth. “The [economic] crisis cannot end fully until home prices in the U.S. are at least stabilizing,” said Alan Greenspan.

Well, it’s two years later and not only has the economy not fully recovered, but home prices at the start of 2011 are trending dangerously close to their 2009 trough. So even if you don’t agree that home prices may be the statistic that matters most, it’s certainly an indicator of this country’s overall economic health.

The latest home price data, according to the S&P/Case-Shiller 20-city home-price index, reveals that prices dropped by 3.1 percent in January when compared to last year and 1 percent from December. The 20-city index is only a mere 1.1 percent above the low we hit in April 2009. That is the one statistic that has many analysts worried:

“These data confirm what we have seen with recent housing starts and sales reports,” said David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “The housing market recession is not yet over, and none of the statistics are indicating any form of sustained recovery. At most, we have seen all statistics bounce along their troughs; at worst, the feared double-dip recession may be materializing. A few months ago we defined a double-dip for home prices as seeing the 10- and 20-City Composites set new post-peak lows. The 10-City Composite is still 2.8% above and the 20-City is 1.1% above their respective April 2009 lows, but both series have moved closer to a confirmed double-dip for six consecutive months. At this point we are not too far off, and that is what many analysts are seeing with sales, starts and inventory data too.”

Looking ahead to spring

With February’s home sales figures as dismal as they were, there’s little to no indication that home prices will firm to any great degree in February. Yet, with the spring homebuying season quickly approaching, mortgage and real estate professionals are holding out hope that the January, February figures were a large reflection of seasonality and not a reflection of a pattern that will continue into the spring and summer months.

With mortgage rates holding at their historical lows and real estate being as affordable as it is, homebuyers are really going to need to venture out into the marketplace in order to turn some of these negative trends around. Distressed real estate remains an abundant option for buyers looking for an even more affordable deal. However, that seemingly ever-growing inventory of distressed properties is also a factor serving to keep home prices subdued.

HSH.com has published (and will continue to) a number of new articles which discuss how to buy and sell in today’s uncertain market. Here’s a sample of just a few:

Closing on your home: Are you walking in blind?
7 ways to doom your home sale
Homeowners: Here’s what you can (and can’t) deduct at tax time
Want to sell? Get a prelisting home inspection

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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