Home prices began double-dipping months ago, but now that S&P/Case Shiller has chimed in, it really must be so.
This report is the most widely-followed home price index, equally quoted in bank boardrooms, Treasury Department back rooms, and Congressional Committees.
The report finds home prices in Q1 of this year are now 2.9 percent below the previous quarterly bottom in Q1 of 2009, effectively giving up all the gains of the past few years, which were of course fueled by the home buyer tax credit.
"Just about everybody agrees we're going to miss the seasonally strong period in 2011, which we should be at the very beginning of right now with May, but nobody thinks that will make any difference," says S&P's David Blitzer. "Everybody's now keeping their fingers crossed for 2012 and wondering whether people just don't want to own homes anymore."
Keeping your fingers crossed for the housing market is just the tip of the iceberg. Prices have now fallen, on this index, more than they did during the Great Depression. "On that occasion, the peak in prices was not regained until 19 years after they first fell," notes Paul Dales at Capital Economics.
So what about the banks? Sure, they took huge write-downs already, but there is clearly more pain to come, especially given that this report out today is actually a three month running average based on home sale closings in March, so really you could say the whole thing is based on sales contracts signed around six months ago. We've seen considerably more housing weakness since then.
"All will have to take new markdowns if these price pressures continue, which everything points to the fact that it will," says Peter Boockvar at Miller Tabak. "Bank balance sheets are still cluttered with mortgage loans, and they are still being asked to take back bad mortgages from those that bought them, like Fannie Mae and Freddie Mac, so the lower home prices go, the risk rises that another round of balance sheet write downs may be necessary."
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