Dreaded Double-Dip in Home Prices Possible

Home prices have plunged for the second time in three years, and analysts say it may be a sign that a dreaded double-dip crash in pricing is becoming a reality.

The threat of a double-dip was highlighted in a recent edition of the Los Angeles Times business section. It was a wake-up call for real estate agents who had hoped the home market was finally coming out of the woods. But numbers show that is not the case, at least for now.

A Standard & Poor’s/Case-Shiller index shows that prices in 20 major U.S. cities dropped an average of 2.4 percent in December from one year earlier. In Orange County, the median selling price of $415,000 is currently about 7.8 percent below the 2010 peak of $450,000, which occurred in May and July. It is 36 percent below the median peak of $645,000 in June 2007.

Home prices appeared to be leveling out last summer after a sharp drop that began in December 2009 and continued through March 2010. Then prices began falling again.

In Fountain Valley, the most recent drop that began in December 2010 has not been as drastic as in other parts of the county. The median list price has held fairly steady in recent months at $579,000. But looking back to early last summer, Fountain Valley’s median price was approaching $650,000.

Yale University economics professor Robert Shiller warns that home prices nationally will likely drop 20 percent to 25 percent more before conditions improve.

Local real estate agents hope Orange County can fare a little better. Gary Briggs, president and broker for Pacific City Properties Inc., believes that the market has stabilized on the southwest side of the 405 freeway.

But in terms of pricing, Huntington Beach has seen some sharp median price drops over the past year. The drops range from 11.4 percent to 32.4 percent, depending on ZIP code.

Garden Grove was a mixed bag with some neighborhoods seeing higher median prices and some seeing lower prices over the past year.

Orange County’s overall median price of $415,000 is 12 percent above the cyclical low of $370,000 reached in January 2009.

Condos were the hardest hit in terms of median price drops. The median price of a single-family home is 35 percent lower than the peak in 2007, while condos are 39 percent of their peak in March 2006.

Fountain Valley has seen one positive sign, possibly resulting from lower pricing. The average number of days homes are on the market has fallen from 126 to 123 in just one week.

Higher- and lower-priced homes sit on the market the longest. Homes with mid-range pricing sell a little faster.