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."

U.S. Foreclosures Fall, Bank Repossessions (REOs) Hit Record High

The national foreclosure rate continued to fall in May from the previous month, according to a new report released Thursday.

The national foreclosure rate fell by 3.27% in May from the previous month.

However, bank repossessions reached a record high during the same month, a sign that lenders are focusing on their backlog of foreclosure inventory before tackling new distressed loans, according to foreclosure database website RealtyTrac, which released the report.

“What it looks like is that the lenders are focusing on processing the delinquent loans they already have rather than initiating new foreclosures,” said Rick Sharga, senior vice president of RealtyTrac.

Foreclosure activity dropped 3.27% in May from the previous month, and was up +0.45% from May 2009. In all, 322,920 properties generated a foreclosure notice.

1 in every 400 homes in America received a foreclosure notice in May. Bank repossessions (known as real estate owned properties or REOs) hit a record high in May for the second month in a row.

All 50 states reported a year-over-year increases in REOs, according to RealtyTrac. It is projected that over 3 million homes will receive a foreclosure notice over the course of this year, said Sharga.