Although the housing market looked like it might have been on the road to stabilization in early 2010, the second half of the year dashed those hopes. Ultimately, housing prices ended the year down 4.1%, according to housing industry consulting firm Clear Capital. The company released its 2010 report today, which includes 2011 forecasts. In short, 2011 won't be much better than 2010.
The best place to start to think about the past and future would be with this very revealing chart that Clear Capital provides (click to enlarge):
First, consider the big picture. National home prices have fallen an incredible amount from their 2006 highs. After rising during 2009 and part of 2010, they've begun falling again, and will continue to decline in 2011. Clear Capital predicts a 3.7% drop this year, which is quite similar to 2010's fall.
But let's look for a moment at 2009 and 2010. This chart certainly appears to show something of a double-dip: home prices were rising again, only to fall in late 2010. In fact, it almost looks like a triple-dip. What was going on here?
In fact, it's pretty easy to explain. You can see that prices began rising towards the end of the first quarter of 2009 -- that's when the home buyer credit's effect began to be felt, having passed by Congress as part of the big stimulus package. Prices began steadily rising until late 2009, when the credit was renewed and the urgency to buy a home was reduced. But its final expiration in May 2010 prompted another rush in the second quarter to buy a home, increasing prices even further. Then the program truly ended, and demand plummeted, causing a steep fall in prices in the second half of 2010.