theTrumpet.com

The Case-Shiller Home Price Index was released yesterday, and it was good news—sort of.

Home prices are up, reported Bloomberg: “Home prices in 20 U.S. cities rose for a fourth straight month in September, pointing to improvement in real estate that’s helping the economy emerge from recession.”

The welcome-sounding news was a rare bit of respite for homeowners and a sector of the economy that has been pummeled.

Yet, as has been the case with other positive-sounding headlines of late, when you drill down into the data, the resulting picture isn’t quite so positive—and may actually be negative.

Home prices never actually rose in “20 U.S. cities,” as Bloomberg’s lead paragraph proclaimed. The data specifically shows that home prices fell in 10 of those cities and were flat in another one. In other words, over half of the big cities surveyed had home prices that did not rise.

The misleading reporting by Bloomberg was made possible by the fact that when you average in the nine cities that had higher house prices, the overall 20-city average squeaked out a positive 0.27 percent increase.

“Disregard” the most recent positive gain in the 20 city index, says Barry Ritholtz, ceo of Fusion IQ. We are “not even close” to a bottom in house prices.

The best-case scenario for housing, according to Ritholtz, is several years—maybe even a half decade—of sideways action for prices, during which time population growth and a firmer economy would hopefully combine to sop up the huge oversupply of homes on the market.

“And that’s if we’re lucky,” Ritholtz says.

Ritholtz’s assessment was underscored by a recent survey by CoreLogic that found that an astounding 23 percent of all U.S. mortgage holders are under water.

With one in four mortgage holders owing more on their mortgage than their house is worth, and the economy still shedding hundreds of thousands of jobs per month, a massive supply of newly foreclosed and for-sale properties could be set to hit an already overly saturated market. And as Economics 101 teaches: All things being equal, supply up equals prices down.

And as long as the housing market continues to destroy consumer wealth, don’t expect retail, construction or banking to recover anytime soon.

Americans should use this time to solidify their finances and get out of debt. The economic storm clouds are building again. •