March 29, 2011

Double Dip in Housing Could Be Imminent, Scholar Says

U.S. home prices for the month of January fell 3.1% from year-ago levels, according to the S&P/Case-Shiller composite 20-city home price index — a barometer for national home prices.

There is definitely a chance that a double dip could occur in housing, given that recent data show little support for housing. (See this graph.) If interest rates begin to climb, that could be the tipping point for the double dip.

Notice that progressive interest rate declines have done little to stimulate housing demand. That is similar to the “liquidity trap” where asset demand is unaffected by lower interest rates. That could signal the end of quantitative easing by the Fed.