Report: Price Gains Narrow, but Double Dip Not Expected…until Spring

A study released by ""Clear Capital"":http://www.clearcapital.com Thursday shows that quarter-over-quarter home prices were up 5.7 percent in August, compared to the previous month's reading.
[IMAGE] It's a gain â€" but the California-based valuation company says price increases are beginning to narrow and appear to be poised for a descent. The rolling quarter increase recorded for August is down from the 7.9 percent quarterly rise the month prior. According to Clear Capital's latest report, national year-over-year price gains also remained positive, but contracted to 6.1 percent.

Even with the slowdown, Clear Capital's assessment is that home prices won't fall below the lows seen in 2009 â€" at least not until next year.

""We continue to see softening of home price gains, due in large part to the buyer pullback after the expiration of the tax credit,"" said Dr. Alex Villacorta, Clear Capital's senior statistician. ""Overall, prices look poised to continue their deceleration with a likely drop into negative territory by the end of the year.""

Clear Capital says to some, this might be an indication that the possible double dip has arrived. While local micro markets may face an eventual double dip, the company

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stresses that it's important to note both quarterly and yearly prices at the national and regional levels are still up, and price gains of the last year-and-a-half have created a buffer against prices going into double dip territory.

For a national double dip to occur, prices would need to drop below their 2009 lows, according to Clear Capital. The company explained that this would be a complete direction change and a decline of 11.7 percent from current levels.

Barring a meltdown reminiscent of late 2008, it is unlikely prices would reach new record lows before spring 2011, Clear Capital says.

Looking at the company's latest report, price gains narrowed in all regions of the country, but were still in positive territory in August. Volatility continues in the Midwest and South regions where the greatest price swings occurred, while the West and Northeast remain more stable.

The Midwest posted a quarter-over-quarter gain of 11.2 percent. The South saw price increases of 4.4 percent. In the West they were up 1.6 percent, and in the Northeast a 6 percent gain was recorded.

Villacorta noted, though, ""We are observing local markets that are within a few miles of each other diverging in their response to the current housing climateâ€-some are showing strong stable growth and others have yet to reach a price bottom. All of this points to the fact that recovery in the housing market will occur segment by segment in micro markets around the country.""

Nationally, Clear Capital also reported that REO saturation â€" which the company defines as the percentage of bank-owned homes sold as compared to all properties sold â€" dropped slightly in August to 22.1 percent.