Housing market slumps to second dip after short rebound

In this May 23, 2011 photo, a home is shown for sale in Chagrin Falls, Ohio.

May 31, 2011 12:00:00 AM PDT
Homeowners across the country are getting that sinking feeling again. House prices are dropping again in the country's 20 largest cities for the eighth month in a row, a loss of 33 percent over the past five years. The results of Tuesday's Case-Shiller Home Index indicate the housing market is going through a second dip after a short-lived rebound last year.

However, the situation in the Bay Area is better than the national numbers. Prices were up 0.5 percent from February to March of this year, but down almost 5 percent compared to a year ago and down almost 39 percent compared to five years ago.

This is prime selling season, but buyers generally aren't confident the real estate market has bottomed out. Some would rather rent than risk buying a home and see it lose value.

Prof. Alexander Field, Ph.D., is an expert on The Great Depression who teaches economics at Santa Clara University.

"I'm afraid we're still in for a fairly prolonged period of sluggish growth. That, combined with the fact that people no longer take it as a given that house prices will continue to appreciate, has made people look again at the alternative of renting," said Field.

"People are experiencing a need to get into Silicon Valley to get that choice job, that choice company, and they're looking at prices. They want to feel comfortable they have housing over their heads," said Michael Sibilia.

Sibilia, president of the Santa Clara County Association of Realtors, believes Silicon Valley's recent surge in hiring by tech companies and slight improvement in jobless numbers will set this region apart from the national trend. For example, comparing average sales prices from April of this year, compared to April of 2010, home prices in Campbell, Cupertino and Gilroy rose. However, they fell in San Jose.

Another issue is apparently casting a shadow over the housing market -- distressed home sales. Bank owned homes, known as REO's, are being held off the market, waiting for a rebound in the real estate market. Sibilia says he would like to see lenders unload all of those properties now so the market can bottom out and return to normalcy. Until that happens, he says, there will be a lack of confidence by buyers because prices could continue to fall.

Sophia Delacotte specializes in distressed property sales at the Almaden office of Coldwell Banker in San Jose. Over the past three weeks, she has seen a number of bank-owned properties going on the market, which may be a hopeful sign that the inventory may be starting to hit the market.

However, damage has been done. Two-thirds of Americans own their homes today, but that's down 3 percent from the peak eight years ago.

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