Is Housing Entering a Triple-Dip Slump? It Depends on Where You're Sitting

Anyone looking for evidence that there are two Americas should look at the latest round of real estate statistics.

On one hand, the financial analytics company FiServ warns that home prices are expected to fall 3.6% by next June, which would seem to confirm a “triple dip” for housing — the initial housing price skid in 2009, and then the price dip after the first-time homebuyer tax credit expired in 2010, and the current slope marking the three valleys.

Meanwhile, in the Hamptons — the fancy cluster of communities out on Long Island’s East End that serves as a playground for the moneyed — the real estate market is doing just fine. A report for Prudential Douglas Elliman by the appraisal firm Miller Samuel shows the activity in high-end homes is so strong that the median price is up 22% from a year earlier. Looks like when it comes to pricey waterfront properties, a “triple-dip” is just something you get on top of an ice-cream cone.

Before we get too upset, however, let’s put this bad news in perspective. The latest prediction is 35% off-peak, the previous dip was 33% off-peak, and the one before that was 31% off-peak. In other words, prices will have slumped again to a new low, but this slump will be nowhere near as dramatic as the initial pop of the housing bubble.

More troubling, perhaps, is the reason for the third dip. The skid from the peak in June to now is, according to many real estate experts, caused by tight credit. In fact, 18% of realtors polled reported that they had suffered the cancellation of at least one pending contract. A pending contract could be cancelled for a number of reasons, but the most likely is that the expected mortgage lender refuses to finance the purchase of the property. Some 70% of home purchases, by the way, require financing; 30% are all-cash deals mainly fueled by investors.

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How does this price data get reflected in home sales? There the news is more promising. Existing home sales were up 11.3% in September from last year. Every region tracked showed recovery in volume — from the Northeast, where sales were up 6.8% from the year before, to the South (with a rise of 10.5%) and the West (a rise of 10.7%). The winner by volume was the Midwest, where the number of home sales was up 17.2% from last year.

Median price for these sales, meanwhile, was down 3.9% from a year ago. That may not seem like a particularly sharp decline, but it likely would have been worse if interest rates had not fallen, giving consumers more purchasing power.

In summary, prices have fallen a little and sales volumes are up, though not as much as they presumably could be if there were an easier lending environment. So much for normal-people America.

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But oh, in the luxury land that is the Hamptons! This year so far, 69 homes have traded in the $5-million-plus bracket. (For comparsion, the New York Post notes that in 2008, before the fall of Lehman Brothers cast a pall over the Hamptons market, 62 such palaces sold between in the first three quarters of the year; for last year, the comparable figure was 61.)

Homes in the Hamptons are also selling slightly faster, as well. Since many people wanting a beach house would buy it in the spring — all the better to be able to enjoy the summer in their new manse — the speed-up of selling times in the third quarter is a positive sign indeed for that market.

As my dad used to say, “Rich or poor, it’s nice to have money.”