Wells Fargo Economists Shake off Home Price 'Triple Dip' Fears

The pace of home price appreciation has decelerated in recent months, but it will not result in another dip where price changes actually fall into negative territory, according to Wells Fargo Securities economists.

"The fundamentals have simply improved far too much for demand and prices to weaken on a sustained basis," according to the Oct. 9 WFS Housing Chartbook.

During the housing crash, house prices plunged 26%, based on the Standard & Poor's Case-Shiller index, before rebounding. Prices topped out in 2010 and took another dive.

Now, concerns are being raised that a third dip is developing as the month-over-month increase in house prices has been declining. "The broad-based deceleration in home prices continued in the most recent data," said David Blitzer, chairman of the S&P Dow Jones Index Committee "However, home prices continue to rise at two to three times the rate of inflation," he said Sept. 30.

The WFS economists attribute the "swing" in prices to "investor buyers stepping way faster than traditional buyers have returned." But they note that inventories of homes are "exceptionally lean" and the economy is expected to grow at 3% annual rate over next two years.

Their forecast calls for a 4% increase in existing home sales next year and a 15% increase in new home sales. "We do not expect the recent moderation in home prices to result in a triple dip."

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