Home prices to slip more but dip to be less severe

Home prices fell 3.2% in the first six months of 2011 and should drop another 2.4% in the second half of the year, according to data provider Clear Capital, but five key markets could record gains by year-end. Clear Capital showed early signs of a double-dip in March before reaching a new low on its index one month later. Prices in the Midwest fell especially hard. In Detroit, prices fell 20% in the first six months of 2011 alone, equal to roughly $12,000 on a home worth $62,500. Analysts at the firm forecast home price gains in only five U.S. markets by the end of 2011: Washington, D.C., New York, Orlando, Dallas and San Francisco. “While most individual markets are also projected to post losses for the year, it is clear prices have begun to level off and are not exhibiting as much volatility as we’ve seen since the downturn began,” said Alex Villacorta, director of research and analytics at Clear Capital. There was some good news. REO, or previously foreclosed properties, accounted for 31.5% of the U.S. housing market at the end of June, down from 33.1% three months before. While still well above historical levels, Clear Capital said the number is “clearly trending downward” as the market absorbs more REO properties. Home prices in the second quarter actually increased 0.9% after nine months of continued decline. “At the mid-point of the year, it’s promising to see the overall market shake off the string of declines observed since late last year, especially in light of significant challenges for the industry,” Villacorta said. “However, we have yet to see the burst in consumer demand to avoid posting a net loss in national prices for the year.” Write to Jon Prior. Follow him on Twitter @JonAPrior.