Last year, a recovery in housing prices seemed to be on track. But analysts now say that that improvement was juiced by home-buying tax credits that have now expired. In addition, unemployment has remained stubbornly high and millions of Americans are still at risk of foreclosure.
A second slide in home prices would act as a drag on the economic recovery — and stand in sharp contrast to other downturns. During the real estate crash of the 1990s, for example, prices slowly but steadily rose from their bottoms.
“It is going to be a rocky bottom, where we bounce around,” said Stan Humphries, chief economist at Zillow.com, a real estate information site. And, after that, “it is likely that real estate appreciation won’t keep up with inflation.”
The Case-Shiller Index, released Tuesday, showed that nine cities — Atlanta, Charlotte, Chicago, Detroit, Las Vegas, Miami, Portland, Seattle and Tampa — hit fresh bottoms, falling to the lowest levels since prices peaked in 2006 and 2007.
California’s coastal cities and the nation’s capital were the only apparent bright spots in the report, with Los Angeles, San Diego, San Francisco and Washington showing year-over-year gains. But when measured month to month, the index declined for every city except San Diego, which inched up 0.1% in November from October.
The performance of the California cities in the index doesn’t reflect the state’s hardest-hit markets, in the Inland Empire and Central Valley. Other recent home price measures show the market slumping statewide. The state’s median home price declined 3.8% in December, according to research firm MDA DataQuick, marking the third consecutive year-over-year decrease after 11 straight months of gains.
“If it continues, then it is not a good sign,” said Jacquelynne Chimera, an analyst who covers the California housing market for investment bank Keefe, Bruyette & Woods. “If we get into the spring selling season and prices are continuing to go down, that would be a cause for concern.”