Housing prices continue to tumble, making their way to their 2009 trough and reinforcing the idea that a double-dip in home prices is inevitable, according to the most recent data from the S&P/Case-Shiller Home Price Indices. The National Index is within a percentage point of the 2009 trough and 11 of the 20 cities surveyed hitting new index lows, as the statistics reveal an increasingly deteriorating housing market.  Annual Returns of the Case-Shiller Home Price Indices - S&P Indices  The release of December’s data shows that the fourth quarter was brutal for the housing market. The U.S. National Home Price Index declined 3.9% through the quarter and was down 4.1% from December 2009, marking the second lowest annual growth rate since the third quarter of 2009, when prices were falling at an annual rate of 8.6% amidst a market in free fall. As of the fourth quarter of 2010, “average home prices across the United States are at similar levels to what they were in the first quarter of 2003,” read the report.  Along with negative housing data, investors had to face continuing social unrest in the Middle East and North Africa, with Libya’s long-time ruler Muammar Gaddafi clinging to power as people take the streets and face the security forces. All three major U.S. indices were in the red in early trading in New York, with the Nasdaq leading the way down, falling 1.3% to 2,798 points by 11:10 AM. The S&P 500 was down 0.9% to 1,331 points while the Dow Jones Industrial Average faced a fall of 0.6% to 12,315.  Avoiding the term “double-dip,” the index’s chairman David Blitzer noted that “despite improvements in the overall economy, housing continues to drift lower and weaker.” Having warned of the danger of the term in last month’s report, but noting that the market would indeed “double-dip” before spring, Blitzer explained that “unlike the 2006 to 2009 period when all cities saw prices move together, we see some differing stories around the country.” For example, while California (Los Angeles, San Diego, and San Francisco) is doing better, the Sun Belt (Las Vegas, Miami, Phoenix, and Tampa) continued to work its way down, making new lows in December. (Read Home Prices Double-Dipping Before Spring, Says Case-Shiller Index).  The 10-City and 20-City Composite Indices posted annual rates of decline of 1.2% and 2.4% respectively, as 13 of the 20 surveyed cities fell from December and 11 markets hit their lowest levels since the housing market peaked in ’06-’07 amidst the securitization boom and mortgage bubble. Cleveland and Las Vegas have joined Detroit in seeing their average home prices fall below their January 2000 levels.  Washington DC was the only bright spot, gaining 0.3% from November and 4.1% from December 2009. (Read Price Stability In 75% Of U.S. Metro Areas By Year-End, Double-Dip Looms).  Housing markets still have to digest the inflow of more and more homes stuck in the foreclosure process. Banks and financial institutions were forced to freeze foreclosures as reports of dubious processes and faulty protocol surfaced. This has generated a large stock of unsold homes that will continue to enter the market, which will add additional downward pressure on prices. While Federal Reserve Chairman Ben Bernanke’s program of quantitative easing has generated a “wealth effect” in equities, it has yet to prop up the beleaguered housing market, which is seen as necessary to support a sustainable economic recovery. (Read Bernanke To Rep. Paul Ryan: QE2 Created 600,000 Jobs).  A double-dip in home prices is over the horizon and on its way. Yale economist Robert Shiller, who created the index along with Karl Case, noted in an interview with CNBC that “price[s] may go down substantially,” and, according to Trade The News, estimated that the decline could be in the 15% to 25% range. (Read Distressed Debt Investors Prefer Real Estate In 2011).
The latest S&P/Case-Shiller Home Prices Indices show a deteriorating housing market which still has room to fall, showing that the economic recovery has not reached the distressed real estate markets.