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Case-Shiller Up -- But Double Dip Ahead?

The closely watched Case-Shiller Home Price indexes gained for the ninth-consecutive month through October, but the level of gains was small enough to spark fears that a double dip in home prices could be coming.

NEW YORK (

TheStreet

) -- The S&P/Case-Shiller Home Price Indices showed another improvement in data through the end of October, with the annual rate of decline of the 10-City and 20-City Composites improved for the ninth- consecutive month. Still, a drop in the number of metro areas that showed month-over-month gains has sparked fears that home prices could be headed for a

2010 double dip

.

Some housing market experts have described the recent

Case-Shiller improvements as an artificial recovery, and expect the housing market to worsen in 2010 due to vacancies and foreclosures, before a true recovery takes root.

The 10-City and 20-City Composite Home Price Indices declined 6.4% and 7.3%, respectively, in October, compared to the same month last year. Notably, all 20 metro areas and both composite indexes showed an improvement in the annual rates of decline in October as compared to September.

However, while the year-over-year home price improvement remained steady, only seven of the 20 metro areas showed month-over-month improvement. The turn-around in home prices seen in the spring and summer has faded, according to S&P chief economist David Blitzer, who described the latest Case-Shiller data as flat.

Blitzer cautioned that the slow fade from previous seasonal gains will set off worries about the home-price double dip, however, the S&P economist pointed investors to a historical precedent -- as well as recent home sales data -- that may make those fears overdone.

"Coming after a series of solid gains, these data are likely to spark worries that home prices are about to take a second dip. Before jumping to conclusions, recognize that the one time that happened at the beginning of the 1980s, Fed policy saw dramatic reversals, which is very different from the stable and consistent Fed policy we have today. Further, sales of existing homes - those included in the S&P/Case-Shiller Home Price Indices - have been very strong in recent months, working off the inventories of houses for sale."

Fears of a double dip in home prices have kept a murky outlook on the homebuilder sector and builders including

D.R. Horton

(DHI) - Get Report

,

KB Home

(KBH) - Get Report

and

Pulte Homes

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(PHM) - Get Report

.

S&P noted that on the negative side of the data story, housing starts remain weak, and there are legitimate fears that the market will be swamped by a wave of foreclosures, while government programs aimed at the housing market will expire in the first half of 2010.

As of October 2009, average home prices across the U.S. are at similar levels to where they were in the autumn of 2003. From the peak in the second quarter of 2006 through the trough in April 2009, the 10-City Composite is down 33.5% and the 20-City Composite is down 32.6%. With the relative improvement of the past few months, the peak-to-date figures through October 2009 are -29.8% and -29.0%, respectively.

Among the best-performing metro areas are some of the same areas that were first and worst hit in the housing crisis. San Francisco has reported seven consecutive months of positive returns; San Diego has reported six; and Los Angeles and Phoenix are close behind with five. Phoenix and San Francisco, in particular, have monthly gains greater than 1.0%.

Turning to the best of the worst on an annual basis, Minneapolis and Portland were no longer reporting double-digit declines, while Denver and Dallas finally neared positive territory with their annual figures at -0.1% and -0.6%, respectively.

All bets are off with Las Vegas, however, as Sin City remained the only market that has not seen any improvement in 2009. Prices have declined for 38 consecutive months, with a peak-to-trough reading of -55.4%. Las Vegas is barely 5% above its January 2000 level, compared to its peak in August 2006, when the average home price was 135% above that same level.

Tampa Bay had the biggest monthly loss through October, with a home price decline of 1.6%, and remains third in year-over-year declines behind Las Vegas and Phoenix, with a decline of 15.2%.

-- Reported by Eric Rosenbaum in New York.

RELATED STORIES:

>>Are Home Prices Headed for a Double Dip?

>>Homebuilder Stocks to Watch in 2010

>>D.R. Horton Comp CEO Up, Profits Elusive

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