House prices in the S&P/Case Shiller index fell 5.3% over the last two quarters of 2010, wiping out the 4.9% growth seen in the previous year and a half and sending the housing market into a double-dip, analysts at Capital Economics said Tuesday. The drop during the back half of 2010, when prices fell 3.3% in the third quarter and another 2.1% in the fourth quarter, puts prices down at levels last seen in 2002. The declines stem from the expiration of the homebuyer tax credit in April, but with prices still falling eight months after that, the fundamentals of the market are more glaring: low demand is falling short of high supply, according to Capital Economics. The Toronto-based firm estimates 850,000 homes are for sale with another 4.5 million properties in the foreclosure pipeline. This shadow inventory of more than 5.3 million homes will continue to push prices downward. Not everyone is so pessimistic however. Anthony Sanders, a real estate finance professor at George Mason University said underwhelming home sales, at least in the later months of 2010, should have been expected. “It’s important to remember that this is winter and it’s normal for sales to be lower,” Sanders said. “The real test is when spring comes in April. That’s when we’ll know if we have a recovery occurring.” Still, Capital Economics said further price declines are ahead, just how steep remains in question. “We expect they will slide by a further 5% this year,” analysts said. “The danger, however, is that a vicious circle of falling prices and rising foreclosures pushes prices even lower.” Distressed home sales, with an estimated market share at between 36% to 47% are a key contributor to the sharp decline as home prices fell in 18 out of the 20 MSAs, according to Scott Buchta, head of investment strategy at Braver Stern Securities. Buchta said that the downward trending is not likely to end soon. “We expect to see home prices continue to fall throughout 2011 as the housing market continues to struggle under the weight of high unemployment, growing inventories of distressed properties and rising interest rates,” he said. “Year-over-year comparisons will be difficult as the impact of the 2009/2010 home buyer tax credits will continue to skew the data for the next several reports.” Write to Jon Prior. Follow him on Twitter: @JonAPrior