Home prices can't 'double-dip' from a nonexistent recovery

Hundred dollar bills in shape of house

The housing market didn't take a turn for the worse this week despite all the hand-wringing over a "double dip" in home prices.

I know the latest housing industry data has the media bemoaning the fact that home prices are back to where they were in 2002.

The closely watched S&P/Case-Shiller index of prices in 20 major cities had bottomed out in early 2009 and then rebounded a little, primarily due to the heavily promoted tax credit for first-time buyers.

Now that the tax credit has expired, the index is falling again and, according to Tuesday's news release, reached a new post-crisis low early this year.

But the idea that prices ever staged a serious recovery in the first place is overstated.

If you look at a chart of the S&P/Case-Shiller index over the past few years, you'll see how small and erratic the rebound has been.

The real estate industry oversold that data in an effort to convince potential buyers -- and itself -- that the market was on the mend.

It's just as easy to conclude that we've simply spent the past couple of years bouncing along the bottom of a depressed market.

Think about it for a minute.

How could homes truly begin appreciating in value again when lenders have been selling millions of foreclosed homes at steeply discounted prices?

RealtyTrac, which follows housing industry trends, says that banks are now in possession of almost 900,000 homes and in the process of seizing another 1 million properties.

A couple million more homes will probably fall into default and foreclosure before the financial crisis finally plays itself out.

It just isn't reasonable to expect a sustained upward movement until that happens.

But that didn't change this week. Or this year. Or any time since the housing bubble burst.

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