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Case-Shiller is Good News - But Don't Get Too Excited.

Home builders, and the markets, are up modestly today. The Case-Shiller Home Price Index, which showed the second monthly gain for home prices in a 2-city index, was perhaps the most important piece of news today.

But it has again ignited debate among traders over what is real--versus what is noise--caused by the distortions that have occurred in the past year in the housing market.

What kind of distortions? Distortions caused by 1) foreclosures, 2) the opposite effect--foreclosure moratoriums and modification programs, and 3) first-time buyer programs.

What does all this mean? It complicates understanding when prices and sales will truly bottom, because withdrawing government support in the future can dramatically affect demand.

As a result, many traders--and analysts—are skeptical that housing is about to turn in a dramatic way any time in the next few months.

Deutsche Bank: "we wouldn't expect home prices to stabilize until 12-18 months from now."

Macquarie Research: "some owners simply cannot afford their homes - a fact that we expect will dampen price gains now vs past cycles."

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