Home Prices ‘Double Dip’ in 12 Cities

By Hui-yong Yu

March 24 (Bloomberg) -- Twelve U.S. cities, including Boulder, Colorado, and Providence, Rhode Island, are showing extended declines in housing values, reversing signs of a sustained recovery last year, according to Zillow.com.

The number of markets in a “double dip” jumped in January from five in December, data released today by Seattle-based Zillow show. The real estate information provider defines a double dip as five consecutive price drops after at least five straight monthly increases. The gains must have been preceded by a period where values fell in at least 10 of 12 months.

The prospect of rising interest rates may be reducing home prices after the government boosted sales in 2009 with tax credits, increased federal housing agency lending and purchases of mortgage-backed securities by the Federal Reserve, said Stan Humphries, Zillow’s chief economist.

“It’s not great news,” Humphries said in a telephone interview. “The market continues to be quite weak and the overall housing recovery continues to be fragile.”

Home prices nationally dropped 0.6 percent in January from the prior month, the Federal Housing Finance Agency said yesterday. Government efforts to bolster the market spurred a 4.9 percent rise in home sales last year, the first annual gain since 2005, according to the National Association of Realtors.

Sales of new homes fell in February to an annual pace of 308,000, the lowest since record-keeping began in 1963, the Commerce Department said today.

Double Dip Markets

The double dip in home prices through January also was seen in Colorado Springs and Greeley, Colorado; Augusta, Georgia; Columbus, Ohio; Harrisburg and Lancaster, Pennsylvania; Little Rock, Arkansas; Green Bay, Wisconsin; Greensboro, North Carolina; and Lincoln, Nebraska, according to Zillow.

Ten other markets, including Boston and Denver, “seem poised for a double dip,” the company said.

Zillow still expects home values to bottom out by June, said Humphries.

Zillow uses actual home sales and its own software to generate estimates of home values, which go into calculating a national home-value index. U.S. home values dropped 5 percent in the fourth quarter from a year earlier, marking three years of annual declines, Zillow said in February.

To contact the reporter on this story: Hui-yong Yu in Seattle at [email protected]

Last Updated: March 24, 2010 15:09 EDT

[link to www.bloomberg.com]