Double Dip in Home Prices Threatens One in Five Markets

Despite what seemed to be a flattening %u2013 and in some cases even a reversal %u2013 of home price declines last year, there are signs that the dreaded %u201Cdouble dip%u201D is developing in as many as one in five markets, according to data released Wednesday by Zillow.

While residential values in some markets appear to have found their bottom, Zillow has observed that prices in 29 of the 143 markets is tracks have leveled off or begun to decrease again after showing at least five consecutive monthly increases %u2013 early signs of what could become a second prolonged period of declines, the company warned.

%u201CWe have seen strong stabilization in home values during 2009, [but] there are clear signs that they will turn more negative in the near-term,%u201D said Stan Humphries, Zillow%u2019s chief economist. %u201CWhat we saw in mid-2009 was a brief respite from a larger market correction that has not yet run its course.%u201D

According to Zillow, the largest markets most at risk to see a double dip in prices include the metro areas of Boston, Atlanta, and San Diego.

Humphries said, %u201CThe good news is that, for those markets that will see a double dip in home values before reaching a definitive bottom, this second dip will not be a return to the magnitude of depreciation seen earlier, but rather will look more like a modest aftershock of the earlier downturn.%u201D

An additional 29 markets, including the Los Angeles and New York metros, increased on a month-over-month basis each month throughout the fourth quarter, but Zillow says the rate of increase slowed from November to December, and several appear likely to experience months of sustained declines in early 2010.