According to the LA Times, there has been a 2.4 percent decrease on the S&P Case Schiller Index, the leading indicator for tracking changes in the value of US real estate. This marks the fifth straight month of declines in the housing market, prompting questions about whether the housing market may be entering a double-dip recession.
The trend illustrated in the Case Schiller Index showed the downturns were not constrained to any one section of the country, but rather nearly all metropolitan areas have reported declines. Specifically, the index showed downturns in Atlanta, Charlotte, Chicago, Detroit, Las Vegas, Miami, New York, Portland, Phoenix, Seattle, and Tampa.
Reports indicate that California endured the downturns better than most, but the Case-Schiller Index doesn’t specifically measure the areas in California that were initially hit hardest when the housing market bubble in 2007, such as the Inland Empire or California’s Central Valley. Foreclosures remain commonplace in these areas.
Experts such as Robert Shiller, an economics Professor from Yale University, indicated that the prices could drop further. The professor mentioned that he foresees housing prices dropping by another 15 percent to 25 percent. He stated that this was not meant to be taken as a forecast, but rather as an indication of the considerable risk the housing market faces.
Dean Baker of the Center for Economic and Policy Research in Washington indicated that the recovery we saw last year was primarily fueled by federal home buying credits that have since last summer dried up. Essentially, without the stimulus money flowing into the economy, prices have again begun to fall. Apart from this, the stubborn 9 percent employment rate has also plagued the real estate market as well. Baker stated that without the tax credit, there is nothing to prevent further deflation.
Not all analysts agree with this. For example Schiller’s partner and fellow economics professor, Karl E. Case, saw potential for a turnaround in the near future. While Case cited the mood might possibly change in the housing market, he fails to address what specifically might shift the mood in the housing market and how soon this may occur.