Double dip or not?

Double dip or not?

Double dip or not?

Home prices are at near their post-bust lows. January saw a double-digit dip in the number of new homes sold. Then Robert Shiller, Yale economist and co-founder of the S&P/Case-Shiller home price indexes, dropped this bomb: "There's a substantial risk of home prices falling another 15%, 20% or 25%," he said. On a national level, Shiller and other economists compare home price changes with income growth over the years. Before the bust, home prices had been outpacing earnings since the late 1990s. Just to get that back to a normal ratio -- which we last saw in 1998 -- home prices would have to drop another 15%, according to Anthony Sanders, a director of Real Estate Entrepreneurship at George Mason University. "Even after the bubble burst, the ratio of income to home prices is still way too high," he said. Many disagree with these assessments. Karl Case, who co-founded the home price index with doom-sayer Shiller, believes that the market will "bounce along the bottom all

year." If that's the case, buyers who take the plunge now shouldn't expect big profits if they sell in the next few years, but they shouldn't have to take a major hit either.

Besides, a home purchase is more than a potential investment, especially for families planning to stay put for a while. The big plus for them is the pleasure of living in their own homes. "People should base their decision on affordability, lifestyle choices and home preferences, not on investment," said Lawrence Yun, the National Association of Realtors' chief economist. Some stable areas, such as Texas and the Midwest, will probably not experience price plunges at all, but other markets, such as Seattle, Portland and inland California, could still fall substantially, according to Baker. And buyers may take heart from some positive recent indicators, such as an up tick in the sales of existing homes in January; a drop in vacant rental homes; and more investors snapping up properties. There's also been an upswing in the number of high-end homes -- those costing more than $750,000 -- being sold, according to Yun. The wealthy buyers of these properties have lots of choices

of where to place their money and many are investing in real estate. "The smart money is making their move," said Yun.

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