The long, painful bursting of the U.S. housing bubble isn't over yet.
Home prices nationwide have tumbled to their lowest point in nine years, according to a closely followed index, wiping out a short-lived rebound, and many economists foresee further declines ahead.
The downward pressure on prices is a sign of the deep problems that continue to plague the housing sector, which remains a stubborn drag on the broader U.S. economy.
While housing is no longer as important to the economic health of the U.S. as it was during the boom years, it exerts a major influence on the behaviour of consumers, who are unlikely to spend freely so long as their biggest investment - a home - is declining in value.
The U.S. housing market officially peaked in 2006 and despite suffering jaw-dropping declines, does not appear to have hit bottom. In the first quarter of this year, home prices fell 4.2 per cent, according to the S&P/Case-Shiller index. Compared with a year earlier, they dropped 5.1 per cent.
Tuesday's data confirmed that prices have experienced a "double dip" - in other words, the low point they touched in early 2009 wasn't a true trough, since the gains that followed proved fleeting.
"Home prices continue on their downward spiral with no relief in sight," said David Blitzer, chairman of Standard & Poor's index committee.
The brief uplift in housing prices last year was driven by a temporary tax credit for first-time home buyers. Once that incentive expired, the underlying dynamics in the market re-emerged.
Those forces include a flood of foreclosed homes, which translates into a glut in supply. Demand, meanwhile, remains weak even with mortgage rates near historic lows. Unemployment is high, banks have tightened borrowing standards, and some would-be buyers now prefer to rent.
Another factor dampening demand is the fact that a large chunk of people who hold mortgages now owe the bank more than their home is worth, making a move undesirable. More than 28 per cent of mortgage holders were "underwater" in the first quarter, according to Zillow, a real estate website.
The destruction in the housing market can be grasped in different ways. The median value of a home has dropped to $170,000 (U.S.) in March from $241,000 in mid-2006, Zillow estimates. According to the Shiller national index, home prices have fallen 34 per cent from their peak in mid-2006 to their trough in the first quarter of this year.
That's a bigger percentage-point drop than the one that occurred between 1925 and 1941, the years encompassing the Depression, according to a note from Paul Dales, senior U.S. economist at Capital Economics.
"We think that prices will fall by at least a further 3 per cent this year, and perhaps even further next year," he wrote.
There was some hint of a silver lining in Tuesday's data. The Shiller index that tracks prices in 20 major U.S. cities showed that the pace of the declines appears to be stabilizing or slowing down. Between February and March, prices fell by 0.2 per cent after adjusting for seasonal factors, the same drop that occurred between January and February.
Economists at Goldman Sachs said they were "cautiously optimistic" about the near-term outlook for home prices. Prices are falling at a slower rate than they were last year, they said, while the weakness in prices appears concentrated in "distressed" sales, for example, sales of foreclosed homes.
The good news for those considering buying, is that the persistent weakness in prices has made homes more affordable than at any point in over three decades, noted Mr. Dales of Capital Economics. At some point, buyers should return, drawn by cheap prices. That in turn could help invigorate the construction industry and provide a fillip to overall economic growth.
Developers say some buyers are forging ahead. "The family with elementary school kids and a puppy when the housing debacle began five years ago now has middle-school kids and the dog weighs 80 pounds," said Douglas Yearley, the chief executive officer of Toll Brothers, a builder of high-end homes, on a conference call last week. "Some people would rather move on than wait for a better housing market."