House prices in the S&P/Case Shiller index fell 5.3% over the last two quarters of 2010, wiping out the 4.9% growth seen in the previous year and a half and sending the housing market into a double-dip, analysts at Capital Economics said Tuesday.
Not everyone is so pessimistic however. Anthony Sanders, a real estate finance professor at George Mason University said underwhelming home sales, at least in the later months of 2010, should have been expected.
“It’s important to remember that this is winter and it’s normal for sales to be lower,” Sanders said. “The real test is when spring comes in April. That’s when we’ll know if we have a recovery occurring.”
Still, Capital Economics said further price declines are ahead, just how steep remains in question.
“We expect they will slide by a further 5% this year,” analysts said. “The danger, however, is that a vicious circle of falling prices and rising foreclosures pushes prices even lower.”
Distressed home sales, with an estimated market share at between 36% to 47% are a key contributor to the sharp decline as home prices fell in 18 out of the 20 MSAs, according to Scott Buchta, head of investment strategy at Braver Stern Securities.
Buchta said that the downward trending is not likely to end soon.
“We expect to see home prices continue to fall throughout 2011 as the housing market continues to struggle under the weight of high unemployment, growing inventories of distressed properties and rising interest rates,” he said. “Year-over-year comparisons will be difficult as the impact of the 2009/2010 home buyer tax credits will continue to skew the data for the next several reports.”