Could Home Prices See A Double-Dip?

Posted by: Chris Palmeri on October 13, 2009

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Home price numbers have ended their free-fall, but a lot housing experts are still concerned about a possible double-dip.

Integrated Asset Services, which tracks troubled properties, says its House Price Index fell .2% in August. It’s the second down month in a row for the index, which saw a 2.8% rise in this year’s first quarter.

The slowdown, however slight, is ominous, says Dave McCarthy, president and CEO of Integrated Asset Services. That’s because there’s a “shadow inventory” of foreclosed properties that remain unlisted and unsold that could throw a monkey wrench in the housing recovery. “We know there’s a sizable inventory of bank-owned homes out there that will be listed at some point, and that could ignite a new wave of stress in the housing market,” McCarthy says.

According to Integrated, several of the nation’s hardest-hit areas may already be feeling the strain. The index reports two of the country’s most distressed counties—San Joaquin in California (Stockton) and Lee in Florida (Fort Myers)—both of which were down nearly 50% from their high-water marks, fell another 7% in August.

Integrated’s numbers are very similar to those reported by real estate info site Zillow.com. It’s numbers, released today, say housing prices nationally were down .1% in August, versus July. Zillow was only slightly less downbeat than Integrated on prices going forward. “Nationally, we may see September turn in a positive month-over-month change in home values but, thereafter, values are expected to start dropping again, and we expect them to keep dropping until sometime in the spring of this coming year, at which time we will have reached a true bottom in home values nationally,” Stan Humphries, the firm’s chief economist says.

Humphries is particularly concerned about the expiration of the $8,000 first time home buyer tax credits on Dec. 1. Without them, buyers may be less anxious to buy.

The Southern California market, which led the nation into the boom and the bust, is still showing signs of improvement, says researcher MDA DataQuick. September was the 15th month in a row with a year-over-year sales gain, although last month’s was the smallest of those increases, the company says.

The median price paid for a Southern California home was $275,000 last month, the same as in August and down 10.9 percent from $308,500 in September 2008. It was the smallest year-over-year decline since November 2007. The region’s overall sale price has held steady on a month-to-month basis since the 7-year low of $247,000 hit in April of this year. The median price peaked at $505,000 in mid-2007.

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Bob Perkins

October 13, 2009 8:41 PM

I have a friend in Palm Beach County Florida that stopped paying his mortgage 13 months ago. In talking to the authorities he found out that the county can only process 500 forclosures a month and that they would probably not get to him until April - 18 months from the time he stoped paying his mortgage.

Strategery

October 13, 2009 10:59 PM

It's a bit outdated, but check out Glenn Beck's housing chart at: http://www.youtube.com/watch?v=lrW6UO5Zkok I think we've got a long way to go.

Rob N

October 13, 2009 11:15 PM

$275,000 for a home in Southern California is starting to look much more reasonable. A two-income family should be able to afford that. Who does keeping the prices artificially up help?

Richard

October 14, 2009 2:21 AM

Government programs which are phased in or out, over months, are more fair and effective. As much as the Obama team had to quickly come up with idea's on how to avoid yet another Republican Depression I think the 'clunkers' program suffered exactly from that, here today, gone tomorrow.
A tax advantage for home buying, and not just by first timers, is needed for at least another 2-3 years. It should also be larger for more expensive markets, say 3% up to a max of $ 500-700k. The buyer can realize the gain over 2-4 years. So the boost to the market is relatively quick, yet loss to treasury is spread out.
To help new construction a modest program could also benefit energy savings, as in requiring R-30 walls, R-40 ceilings, and smart wiring.
We should also hold China accountable for the massive damage their drywall has caused; since the Communist government essentially runs the country and companies, it is liable. Either it pays or we hit their imports for damages, which likely will require $ 10 Billion or more.

Ballbuster

October 14, 2009 2:41 AM

The real estate hustlers are at it again, publishing propaganda that the real estate prices have reached a bottom. These con-artists are following Nazi Goebbel's mantra: if you repeat lies enough times, people will start believing them. Since 2007 to today, Palmeri and his ilks have repeadedly declared and proclaimed that the real estate bottom have been reached. After Palmeri's calling out "Wolves!" thrice too many times, BW readers have abandoned him to the pasture. As to the future of real estate prices, the facts show that big banks have been able to withhold hundreds of thousands of foreclosed homes from the market using the new "cook the book" accounting rules. In addition, many banks have allowed their default homeowners to stay in their upside-down home so long as they make a payment that is equivalent to rent while the banks drag their feet in foreclosure proceedings. There are other variations of the same theme: keep real estate off the market. Once all these shenanigans come to an end, the real estate inventory will swell up pushing prices further down. As more commercial real estate foreclose in the coming years coupled with rising unemployment, the tide of foreclose will be unstoppable. The death spiral of home prices has just begun. Those who believe in Palmeri's propaganda mine as well believe in Goebbel's because both are based on nonsense paid for by special interests.

Bill Sardi

October 14, 2009 6:07 AM

Home prices need to drop by 30% or so, to 2001-03 values. Woe to those who took out 2nd mortgages on false values to squander the money and now can't pay their mortgage. Real estate agents and banks are limiting inventory, telling potential buyers they can get on a wait list (bid list), and are manipulating supply and demand. We bought a 1-acre property/5800 sq.ft. home in 2003 for $895,000. By 2006 zillow said it was worth $2.4 million. Today zillow says $1.5 million. Banks can't hide their repo list forever. Wait to buy. Time to rent. Virtually all mortgage contracts today represent usury.

Dennis Norman

October 14, 2009 8:54 AM

I think Chris has made some very good points in this article..not to be gloom and doom, but there are many negative factors still out there that are continuing to put downward pressure on home prices in the US housing market and will not go away soon, including:

Foreclosures in August were up 73 percent from the year before and borrowers that are 90 days or more delinquent on their mortgages increased almost 70 percent from a year ago, see the figures at:

http://realestateconsumernews.com/real-estate-market/foreclosure-rate-in-u-s-increases-73-percent-in-august-from-a-year-prior/

Also, nearly half the homes for sale have reduced their prices, on average twice, see:

http://realestateconsumernews.com/home-sellers/nearly-half-of-homes-for-sale-have-reduced-prices/

Wes

October 14, 2009 10:12 AM

For this index, yes. For nationwide prices as a whole, no. The reason is there has been no recovery in YoY indexes, the so-called golden standard of truth. What we have seen is a real estate industry that calls out green shoots from data that was readily dismissed a few years ago. The decline has a long ways to go.

Chas. willmarth

October 14, 2009 5:23 PM

We have a long way to go. In Florida the sub prime and Alt-A home owners have been washed out already. Now we are seeing the $1,000,0000 and up homes that are now worth half of the purchase price going to foreclosure. It gets worse each day and the banks are all holding back. If the banks put all these losses on the books they would be insolvent !!!!

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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