Nameless, formless crisis enveloping nation’s home price indices

Fears of a double dip in housing are giving away to a realization that the nation’s mortgage markets are facing a much colder reality — something that will not so easily be named, but is nonetheless hanging around for a very long time. Both Standard & Poor’s and Radar Logic Research released updates Monday on the prices sellers are asking for residential properties. Neither is positive. “No matter what you call it, a ‘double dip’ or the continuation of a long process of deterioration, the current trend in home prices is evidence that housing markets are continuing to languish,” said Quinn Eddins, director of research at Radar Logic. “We expect the negative trend to continue under a severe supply overhang that includes a large and growing ‘shadow inventory’ of homes in default or foreclosure,” Eddins said. In the past, such market behavior would be called a “w-shaped” recovery. But the National Bureau of Economic Research called an end to the recession in June 2009, and nearly two years later, there is not enough improvement to resemble a recovery in the housing market. The RPX composite index, which tracks 25 metro areas, reached its lowest level since peaking in 2007. At $183.18 a square foot, today’s RPX Composite price is 34% lower than its peak value of $278.32 a square foot, which reflects closings during the period ending June 8, 2007. The RPX Composite price is lower than the price for any other date since May 14, 2003. An increase of cash buyers and some sales volume on steeply discounted jumbo properties notwithstanding, the nation’s home prices are following the supply-side much more so than the demand side. U.S. home prices declined for five straight months leading up to 2011, according to a recent report published by Standard & Poor’s. The 20-city S&P/Case-Shiller home price index has dropped 4.3% since July. And when Case-Shiller comes out again, S&P expects more drops. “Existing U.S. home sales rose and new home sales declined in January, while the official housing inventory level dropped for existing homes and declined at a slower pace for new ones,” said S&P structured finance research analyst Erkan Erturk. “We attribute the increase in existing sales in January to buyers locking in lower rates as mortgage rates started to rise,” he added. “Nevertheless, mortgage rates are still low by historical standards.” Write to Jacob Gaffney. Follow him on Twitter @JacobGaffney.