Home Prices Have Further to Fall

How is it that last week we were driving nails into the housing market's coffin, with negative report after negative report, and then suddenly today the stock market took a bounce on one new price report, and I'm hearing the word "bottom" over and over? This is the kind of news day that makes my head spin, and then, inevitably, as I endeavor to make sense of it all here on the blog, any number of you charge me with, in your kindest words, being overly negative.

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The S&P/Case-Shiller Indicesshow the U.S. National Home Price Index rose 4.4 percent in the second quarter of 2010, after having fallen 2.8 percent in the first quarter. Home prices are 3.6 percent above their year-earlier levels.

Okay, there's your quote.

Now for reality.

"Housing prices have rebounded from crisis lows, but other recent housing indicators point to more ominous signals as tax incentives have ended and foreclosures continue."

I can say "backward-looking, government stimulus-induced, seasonally aberrant" data until I'm a member of the blue man group, but I know there are those out there who still think this is great news. Even the folks at S&P/Case-Shiller warn us to look at the non-seasonally adjusted data because the current state of the economy has distorted all the seasonal factors. Month to month is also not worth it because of issues like the tax credit.

While some may see these price gains from the trough as a sign of bouncing along the bottom, most experts believe home prices nationally will fall again, but not necessarily immediately.

"We expect them to rise for another month or two, but then start to decline," says economist Patrick Newport at IHS Global Insight. "In our view, the housing glut and foreclosures will drive the national Case-Shiller index down another 6–8 percent, with prices bottoming out in 2011."

Questions? Comments? RealtyCheck@cnbc.com