I was fighting traffic on my way in to work today, when I heard a headline on the radio, something to the effect of, "Good news on the housing front! Foreclosures are moderating, potentially signaling an end to the housing crisis."

This is why people don't trust the news. Headlines.

Photo: Jeff Turner

Yes, the number of properties in the U.S. that received foreclosure filings in August was .47% smaller than that same number in July (less than 1%).

July's number, by the way, set a new record.

So we are less than 1% off the record.

If you look inside the numbers you find that the fall was largely due to a 13% drop in REOs, which are the final stage of foreclosure when the bank takes the property back at the courthouse auction.

All other foreclosure notices, like defaults, bank notices or auction notices, together rose 3%, and they make up a much larger share of total filings.

That means that the pipeline is only increasing.

Housing analyst Ivy Zelman lays it out well in a report she sent me today:

"Over the past several months, we have witnessed many data points indicating stabilization and improvement in the housing market. While these data points are certainly a welcome reprieve after three long years into the housing downturn, we cannot help but focus on the elephant in the room - the ever-growing pent-up supply of foreclosures in-process... the next wave of foreclosures is not a myth, but is instead the key to the direction of the housing market over the next 6-12 months"

Zelman estimates that the foreclosure timeline has doubled "due to moratoriums, modification efforts, lenders' self-serving motivations, postponements at trustee sales and logistical delays, which are all leading to a mounting pipeline. In total, foreclosures in-process are 88% higher than the year ago, led by prime non-jumbo (up 159%) and prime jumbo (up 152%) mortgages."

Treasury Secretary Timothy Geithner said it himself today, "the foreclosure problem is going to last a long time." According to Treasury's own report, banks participating in the administration's loan modification program have only made offers to 12% of eligible borrowers. The treasury report listed, bank by bank, who was doing what, and Geithner claims, "I am quite confident that will produce much much faster modifications more quickly because institutions do not want to live with the consequences of being so far behind the curve." I'm not so sure about that, especially when no one big bank is doing any better than another.

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All of this adds to banking analyst Meredith Whitney's contention that home prices could fall much further than they already have. "No bank underwrote a loan with ten percent unemployment," she said on Squawk Box. "There's no doubt that hoe prices go down dramatically from here, it's just a question of when."

I believe we will see another dip in housing this fall, despite all the claims that four months of rising home prices mean we're at bottom. As Whitney notes in her own report, "seasonally, prices improved from the months of January to May in each of the last three years when home prices have been in decline."

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I've said it over and over. You can't look at month to month price comparisons. You have to look year over year. When I see a year over year improvement, I'll change my tune.

Questions?  Comments?