From Zillow: Recovery of Home Values Slowing; Some Markets Poised for Double Dip
…More significantly, a number of large markets saw an end to their streak of consecutive monthly gains, including Atlanta, Baltimore, Boston, Denver, Minneapolis, and Portland, Ore. In total, one in five (29) of the 143 markets tracked by Zillow saw monthly depreciation or flattening of home values in December after having experienced at least five consecutive month-over-month increases in home values during 2009. If these declines are sustained, as we expect to happen in many markets, the result will be a “double dip ” in home values, defined as two periods of sustained declines in home values separated by a brief period of stabilization or recovery.
Home values in an additional 29 markets, including the Los Angeles and New York metropolitan statistical areas (MSAs), increased on a month-over-month basis each month throughout the fourth quarter. However, the rate of increase slowed from November to December in 21 of those markets, and several appear likely to experience several months of sustained decline in early 2010.
While we’ve had a brief respite in mid-2009 from home value declines in many markets, the larger market correction has still not fully run its course. The recent stabilization owed a lot to policy support in the form of tax credits, lower mortgage rates and increased Federal Housing Administration lending. The remaining correction in home values we’ll see in the first half of this year is a function of market fundamentals, such as the increasing flow of foreclosures, high levels of inventory in the market and a probable decrease in demand as the impact of the tax credit wanes and mortgage rates rise.
While the next few months are likely to bring further home value declines in most markets, we do expect to see a national bottom in home prices by the middle of this year. Thereafter, home values are likely to bounce along the bottom with real appreciation remaining negligible for some time. This sustained period of languid real estate performance will really constitute the final leg of the housing downturn, as our possibilities are either sharper depreciation now followed by a sharper rebound off the bottom, or modest depreciation now followed by a long period of minimal appreciation. Either path results in home values getting to the same level ultimately in real, inflation-adjusted terms. The second path appears more likely at this point.
