After the Great Recession, there were some pundits who theorized that real estate would make a W-shaped recovery. With the S&P/Case-Shiller housing prices out this morning, it’s now clear that there are not one but two W’s in the chart — and that’s not a good thing. Index prices fell 1.1% from November to December. In other words, we’ve now experienced a quadruple dip.
That’s the bad news. The good news is that the market oscillations we’ve been seeing over the past three years are contained in a fairly narrow band. While the index is technically at its lowest level in five years, it really hasn’t been bouncing around that much compared with the collapse of 2006–08. In fact, at any time in the past three years, you could have said that “the housing market is at 2003–04 prices,” and you would have been right.
(MORE: Housing Recovery at Last? Evidence Mounts)
In other words, in 2006, real estate prices were a boxer that got knocked out and hit the mat, hard. The past three years have been a story of watching him struggle to get up again and fail repeatedly. He’s on his knees, but at least he hasn’t fallen to the floor again, either.
Currently, the 20-city Case-Shiller index is down 33.8% from peak housing prices in the summer of 2006. That puts it back at the levels of mid-2003.
A handful of the cities that make up the index did better than the aggregate. Miami and Phoenix made monthly gains. We’re talking about December data, remember, so the 0.2% upward blip in Miami and the 0.8% pop in Phoenix reflect buyers chasing sunshine.
Atlanta, on the other hand, didn’t fare as well; it was down 1.8% over the previous month. Detroit, meanwhile, was down 3.8% on a not-seasonally-adjusted basis.
Despite the bad news, the industry is starting to hazard some optimism. Homebuilder sentiment, which has risen for five months in a row, just popped to its highest level in five years. And residential real estate is traditionally a cyclical industry that gains momentum in the spring.
Even so, I think this recovery is still a green shoot struggling to poke through the soil, and I suspect we’ll continue bouncing along the bottom for most of 2012. After all, there are still some 10 million underwater homes in this country.
