With Winter Looming, Watch Out for a ‘Triple Dip’ in Home Prices

NEW YORK (MainStreet) -- A triple dip may be a good idea at Baskin-Robbins, but it’s a lousy one for U.S. home prices.

That’s exactly what the housing market could experience by spring 2012 – if the economy falls back into recession, according to real estate monitoring firm Clear Capital, which just released its monthly Home Data Index.

The immediate takeaway is a positive one: Clear Capital says that U.S. home prices, on average, have risen 3.5% across the board in the past three months (from July to September).

But the longer-term view isn’t as rosy. The index says that there is a “strong potential for a triple dip” decline in U.S. home prices in early 2012, but only if the economy “falls back into its second recessionary period since 2006”.

Clear Capital won’t venture to guess exactly if we’re headed into recession -- after all, there’s really no telling how the economy will look in the next six months. But using current economic data, the firm does say that if the economy continues on its current trajectory, U.S. home prices would fall by 3.2% in the next six months.

If there is any good news under that scenario, Clear Capital says the projected decline is significantly better than the 7.7% decline the U.S. housing market experienced from September 2010 to April 2011.

The firm says that the first dip in housing prices took place in the winter of 2009, and the second one in the winter of 2011. The dreaded triple dip would likely follow that cold weather path, and hit the country by winter 2012.

“The September home price measures show continued slowing of the price gains we’ve seen this year, especially across the spring and summer months,“ Alex Villacorta, director of research and analytics at Clear Capital, said in a statement. “The housing market has yet to demonstrate the fundamentals necessary to overcome a seasonal slowdown over the next six months, which drives our projected 3.2% drop in national home prices through the first quarter of 2012.”

What’s really dragging on home prices are several old economic obstacles – the jobless number and lousy consumer sentiment.

“The normally positive market forces of record low mortgage rates and near record lows in home prices are being offset by high unemployment rates and general consumer pessimism about the economic future,” adds Villacorta. “Until we experience a more stable economic environment, I expect home prices to remain relatively flat or slightly down for the foreseeable future.”

Clear capital does state that certain areas of the country, like Cleveland (18%), Chicago (11%), and New Orleans (10%) are experiencing solid housing price growth. But hard hit areas like Las Vegas, (-1.7%), Tucson (-1.6%), and Los Angeles (-1.5%) continue to be stuck in the mud.
But any further housing price declines should only come if the economy falls back into recession.

So cross your fingers and hope the next time the term “triple dip” pops up in a conversation, you’re at an ice cream parlor, and not a real estate agent’s office.

If you’re worried about where the economy is headed, check out MainStreet’s look at How to Prepare for Another Recession!