The prices of single-family homes have dropped to their lowest level since 2009, creating a “double dip” as values fell below where they were when the housing market collapsed, according to a closely watched price index released Tuesday.
The Standard & Poor’s Case-Shiller index shows that single-family home prices fell 4.2 percent nationally in the first quarter from the previous quarter, leading analysts to conclude that prices have fallen by more than they did during the Great Depression.
“The peak-to-trough decline is worse,” said Mark Zandi, chief economist at Moody’s Analytics. “It highlights the severity of the problems in the housing market.”
The report included prices in 20 major metropolitan regions and found that that index fell 3.6 percent in March from a year earlier. Prices slipped in all areas except Washington, where they rose 4.3 percent, buoyed by the region’s strong job market. By contrast, 12 metro areas fell to new lows, led by a 10 percent dip in Minneapolis.
The 20-city index had peaked in the second quarter of 2006, when the housing market sizzled. It bottomed out in April 2009, started climbing again in early 2010 and has now dropped below the 2009 low.
Housing prices face pressure from the bloated supply of foreclosures and the nation’s high unemployment rate. The problems are not expected to ease soon. Flawed paperwork prompted some of the nation’s largest banks to temporarily halt foreclosures in September, creating what many analysts called an artificial lull.
Federal and state officials have since teamed up to negotiate what’s expected to be a multibillion-dollar settlement with banks that embraced shoddy foreclosure practices. Many economists expect that foreclosure volume will pick up once a settlement is reached, if not before, creating another round of price declines.
“I’m thinking we might even see a triple dip,” said Mark Vitner, a senior economist at Wells Fargo Securities. Vitner says there are 2.2 million homes in foreclosure and an additional 2 million mortgages that are more 90 days past due. Clearing about a third of those foreclosures is necessary before prices can stabilize, and that could take at least a year, he said. Any setback in the economy can prolong that time frame.
Paul Dales, a senior economist at Capital Economics, said prices have fallen by more than the 31 percent decline endured during the Great Depression. He predicts a further drop of at least 3 percent this year. “We have another couple of years of falling prices and then stagnant prices before prices really rise again,” he said.
The glum numbers released Tuesday measure repeat sales of single-family homes, and the economists who crunched them focused on data that is not seasonally adjusted. They say that huge swings in foreclosure activity disguise seasonal patterns.
The report also showed that the month-over-month numbers are also grim, with the price index declining 0.8 percent overall. The two exceptions: Washington showed a 1.1 percent gain from February to March, and prices in Seattle were flat.
Once the foreclosures clear the system, the housing market should be poised for a comeback, economists said. They cite recent reports showing that the volume of seriously late mortgages is down and the prices of non-distressed properties are holding up.
Until the housing market recovers, “the U.S. economy will not grow on all cylinders,” said Jack Ablin, chief investment officer at Harris Private Bank.