Zillow on a housing market double-dip

A new report by Zillow shows that mid-2009 home price gains are increasingly turning into home price declines and that some major markets may soon see a dreaded "double-dip".

Here's the summary graphic that just adds more fuel to the debate about whether home prices are now rising or falling and what the year ahead holds.
Recall that the S&P Case-Shiller Home Price Index from a few weeks ago showed that the month-to-month gains have eased and may already be reversing as index co-creator Robert Shiller has gone on record saying he thinks home prices are headed back down.

Some excerpts from the Zillow report:

December brought signs that the fledgling recovery of home values in many markets is slowing again. U.S. home values got a bit lower again in December relative to November levels and the rate of decline got just a little bit higher as well. The national Zillow Home Value Index (ZHVI) was down 0.21% on a monthly basis in December to $186,200 versus a monthly decline of 0.16% in November. Annualized depreciation was 5.0% nationally.
...
While we’ve had a brief respite in mid-2009 from home value declines in many markets, the larger market correction has still not fully run its course. The recent stabilization owed a lot to policy support in the form of tax credits, lower mortgage rates and increased Federal Housing Administration lending. The remaining correction in home values we’ll see in the first half of this year is a function of market fundamentals, such as the increasing flow of foreclosures, high levels of inventory in the market and a probable decrease in demand as the impact of the tax credit wanes and mortgage rates rise.

While the next few months are likely to bring further home value declines in most markets, we do expect to see a national bottom in home prices by the middle of this year. Thereafter, home values are likely to bounce along the bottom with real appreciation remaining negligible for some time. This sustained period of languid real estate performance will really constitute the final leg of the housing downturn, as our possibilities are either sharper depreciation now followed by a sharper rebound off the bottom, or modest depreciation now followed by a long period of minimal appreciation. Either path results in home values getting to the same level ultimately in real, inflation-adjusted terms. The second path appears more likely at this point.

This is a very good summary (in line with my own thinking as one who plans to buy property later this year) and, despite what you may hear from your local realtor, there really is no urgency to buy in the months ahead except for the incentives now being dangled in front of consumers in the form of low interest rates and a check from the government.

All else being equal, once these two supports go away, home prices are likely to fall sharply, negating the benefits of the generous financing terms and the tax credit that were available earlier in the year and, if you plan to pay cash, you'd be a fool to buy anything until much later in the year.

But, don't be surprised if both the tax credit and the Fed purchases of mortgage backed securities that have helped to keep home loan rates historically low are both extended as the housing market falters.