The Case-Shiller Home Price Indicies track home prices. There is a 10-City Index and a 20-City Index. The chart below is updated to show the June results (via Calculated Risk):
As the graph shows, you can see a massive rise starting in the late 90’s, a crash starting in 2006, a rebound in 2009, and another move down in 2010. This is what you call a “double dip”.
Rather than go over the reason why there is a double dip going on, I want to outline why this isn’t good:
- Hampers future home development
- Further strain on consumer balance sheets
- Increases the odds for default
- Psychological – “here we go again”
- All the above puts pressure on bank balance sheet
- Lower values + increased balance sheet pressure = less loans
The graph and the above reasons point to the fact that housing won’t be snapping back anytime soon. Housing usually leads the recovery, but now it will continue to be a drag.
The silver lining is that this is not breaking news. I don’t know of anyone really who thought housing would snap back and the markets have probably priced that in.
Thus while housing is still a headwind on the economy, it was expected to be and I would hope consumers, banks, and corporations planned accordingly.
