European Home Prices Could Face 'Double Dip'

---

Despite signs of stabilizations, many European markets could be facing a new drop in prices in the next year, according to a new study.

With the notable exception of Ireland, price drops have slowed in most European countries, including France, Italy, Spain and The Netherlands, according to Standard & Poor's, the ratings agency. Prices are even rising in the U.K., the agency notes.

But economies are still struggling and many markets remain overvalued, the report concludes.

"We may not yet have witnessed a full correction of some of the imbalances that the 1999-2007 housing bubble created, such as decreasing affordability or surging price-to-rent ratios," the report says.

France "leads the pack" with an 18.5 percent overvaluation, while Spain could be due for another 12 percent correction before the market "regains long-term equilibrium."

"In those that are likely still overvalued, prices could take a second dip later this year or in early 2011," said Standard & Poor's chief economist in Europe Jean-Michel Six.

---