It’s official: The double-dip recession in housing is real. And it’s not going to turn around anytime soon. Average home prices fell by 4.2% in the first four months of 2011, according to a new report by Standard & Poor’s. It was the second straight quarter of decline, proving that the 3.6% drop during the final quarter of 2010 was no fluke.
“This month’s report is marked by the confirmation of a double-dip in home prices across much of the nation,” David M. Blitzer, chairman of the the Index Committee at S&P Indices, said in the report.
Only two cities, Seattle and Washington, D.C., saw slight increases in home values. Every other city in the company’s 20-city index saw average values drop. Home values in Minneapolis fell by 10%, the first double-digit decline S&P has reported since the 12% drop in Las Vegas in March 2010. The average house in Atlanta, Cleveland, Detroit and Las Vegas is now worth less than it was in January 2000.
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So what happened to the rebound? After hitting a low in early 2009, average home values climbed for almost a year.
It turns out the widely ballyhooed “recovery” in the housing markets was the economic equivalent of cotton candy, S&P found.
“The rebound in prices seen in 2009 and 2010 was largely due to the first-time home buyers tax credit. Excluding the results of that policy, there has been no recovery or even stabilization in home prices during or after the recent recession,” Blitzer says.
The federal tax credits may have masked the housing market’s underlying weakness. Now that they’ve expired, housing prices are headed nowhere but down, S&P predicts.
“Further, while last year saw signs of an economic recovery, the most recent data do not point to renewed gains,” Blitzer says.
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