Home Prices: They're Not Quite What They Seem

I put a theory out in yesterday's blog, something of a prediction, that despite a steep drop in home sales, home prices could actually rise due to the makeup of what is and is not selling. Today's numbers prove that theory. Despite a catastrophic collapse in home sales, home prices remained stable and actually added 0.7 percent year over year.

It's not true stabilization because of the mix factor. Take a look at a breakdown of what sold in what price range:

As you go from the $100,000 range on up, ($100,000 and below are likely mostly foreclosures) you see the sales drop moderate with each rising range; when you get to $1 million+ the sales numbers are actually up. Sales distribution consequently moved in July, with the percentage of homes in the $500,000+ range growing in share, and those under $500,000 losing share from June.

So yes, home prices rose ever so slightly, but also artificially.

"We need to be cautious about how we read the data," admits the Realtors' chief economist Lawrence Yun. "Because the buyers who left the market in the latest round are typical first-time buyers, but people who continue to stay in the market (are) people ... buying higher-priced homes."

With the supply of homes at a record 12.5 months, job growth at a crawl and confidence in the housing market way way down, prices will be under some tough pressure going forward.

Questions? Comments? RealtyCheck@cnbc.com