Silicon Valley Home Prices to Suffer “Double-Dip” Then Turn Higher

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After rebounding from a low reached in early 2009, home values in Santa Clara and San Mateo counties have dropped again in a double dip that renews worries about the strength of the housing market, real estate information service Zillow reported Tuesday. Santa Clara County home values have fallen 25.2 percent since their peak in 2006, while San Mateo home values have fallen 24.2 percent.

The phrase “double dip” refers to a new drop in home prices after the recovery from a previous drop. The latest downward trend in area home values began in the middle of last year, after the end of two tax breaks for homebuyers, according to Zillow. The tax breaks encouraged people to buy homes sooner than they might have. That left fewer buyers in the second half of the year, resulting in slower sales and falling prices.

But prices and sales may be headed back up in the next few months Zillow said Bay Area home values have sagged 28.7 percent from their high of $679,160 in the second quarter of 2006, hitting $484,495 for the quarter that ended in December. They were down 1.1 percent from the previous quarter.

California home values also saw a double-dip in the fourth quarter, Zillow said. But the company expects a gradual recovery of home prices over the next few months. In Santa Clara County, by Zillow’s calculations, home values neared but didn’t fall below the previous low of April 2009. They fell 3 percent in the quarter that ended Dec. 31, and 1.8 percent from a year earlier, as declines in home prices accelerated at the end of the year. After climbing to $749,100 in June 2007, median single-family home values in the county dropped to $556,400 in April 2009, then climbed to $587,700 in mid-2010 before declining again in the second half of the year to $560,600 in December.

Underwater mortgages — those worth more than the current value of the home — rose to 13.8 percent of the county’s homes with mortgages, up from a revised 11.7 percent at the end of the previous quarter, Zillow said.

In San Mateo County, home values fell 3.9 percent over the quarter and 4.5 percent from a year earlier. Home values have fallen 24.2 percent in the county since their peak in the second quarter of 2006, when they reached $809,922. They hit bottom in March 2009 at $635,000.

Homes with negative equity increased to 13.2 percent of the housing stock that has mortgages, up from 10.5 percent at the end of the third quarter. Most of the country saw increases in negative equity in roughly the same range. The reason: A scandal over improperly prepared foreclosures caused major lenders to impose a moratorium. Falling prices added to the number of underwater mortgages.

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