Housing Double Dip Has Officially Arrived...

Unfortunately, it is official.

Home prices have double dipped nationwide, now lower than their March 2009 trough, according to a new report from Clear Capital. It was inevitable that a surge in sales of foreclosed properties and a big push by banks to facilitate short sales would force home prices down dramatically.

Sales of bank-owned (REO) properties hit 34.5% of the market, according to the survey, resulting in a national price drop of -4.9% quarterly and -5% year-over-year. National home prices have fallen -11.5% in the past 9 months, a rate not seen since 2008.
Add short sales, where the bank allows the borrower to sell for less than the value of the mortgage, and prices have nowhere to go but down. 

"With more than one-third of national home sales being REO (bank owned), market prices are being weighed down as many markets have not regained enough footing to withstand the strain of the high proportion of REO sales," says Clear Capital's Alex Villacorta.

If prices continue to fall further, which they likely will in the short term, the number of so-called "underwater" borrowers, those with negative equity, will rise even higher, which could in turn result in more loan delinquencies.

Nationwide more than 25% of all homeowners with a mortgage are in a negative equity position, but in some markets, that number is far higher. 46% of Massachusetts borrowers are underwater, according to LendingTree. The last time home prices fell at this rate, 3 years ago, they were then boosted by government stimulus in the form of a home buyer tax credit. 

"A note of caution to those looking for a strong end to 2011: The last time no incentives were in place and distressed inventories were this high, home prices fell sharply," warns Villacorta."