Rebound in housing prices is over

The rebound in home values is over, as residential real estate prices fall and the threat of a second dip in the housing market begins to take shape.

The latest evidence comes from the closely watched S&P/Case-Shiller home price indexes, which reported Tuesday that its 20-city home-price index fell nearly 1 percent between January and February, its fifth monthly decline and the lowest level since June 2009. Of the 20 metropolitan areas tracked in the index, 19 declined in February.

The new report echoes last week’s report from the Federal Housing Finance Agency, which also showed that home prices fell in February and were down 3.4 percent over the past 12 months.

By contrast, the Case-Shiller report shows a year-over-year gain in its 10- and 20-city indexes. But that’s a reflection of what was happening a year ago, not what’s happening now, writes Paul Dales, an economist for Capital Economics in Toronto, in an analysis.

“The double-dip in prices that we have been expecting has begun,” he writes. “Admittedly, the surge in demand associated with the end of the tax credit could well support prices for a few months. But thereafter, we think that prices will drop back by at least 5 percent by the end of next year.”

One bright spot in the Case-Shiller report is San Diego, which alone among the 20 cities tracked saw prices increase in February. It was the tenth straight monthly rise for San Diego and a 9.4 increase from last year’s lows.

Most of the US, however, appears headed in the direction of Chicago, which has lost 7.2 percent in value over the past five months – its fastest five-month decline since May of last year.