Home Prices Rise! (and Fall …)

Despite the release of a happy-seeming set of housing figures, the nation's real estate market swan dive continues.

Providing a much-needed zap of optimism, a government report issued today found that the average price of new homes was up 3 percent in April from the previous year. That's on top of an above-consensus 3.3 percent increase in sales from March.

Now, which one of you soul-killing economists is going to tell me this is bad news?

"The price numbers would be a lot more exciting if we hadn't had the other depressing ones released at the same time," says Robert Brusca, chief economist at Fact and Opinion Economics.

That's right. The S&P/Case-Shiller Home Price Indices were also released today. This second, well-respected report showed house prices "in a freefall," according to Patrick Newport, U.S. economist at Global Insight.

The U.S. National Home Price Index fell more than 14 percent—the largest drop of its two-decade-long history—in the first quarter of 2008 compared with the same period last year. At the same time, the 10-city and 20-city composite indexes posted fresh record declines.

"The Case-Shiller index is more scientifically set to compare apples to apples, so it should be a more accurate index," Brusca says.

Even worse, home prices still have plenty of room left to fall, says Ian Shepherdson, chief economist for High Frequency Economics.

From a report issued today:

Inventory of existing homes is still very close to its record high so prices will continue to fall rapidly. Since its May 06 peak the Case-Shiller index is now down 15.7%; we expect the peak-to-trough drop to reach 25-to-30%.

Well, how about the increase in sales in the government report? That's still good news, right?

Nope, according to economists at Goldman Sachs:

New home sales rise by 3.3%, but that should not be read as a turnaround. The increase follows two months of substantial declines, with sales down by 11.0% in March and February by 4.2%. Declines that large tend to be followed by a partial rebound. Further, there were substantial downward revisions to prior months; these essentially offset any positive news from the increase.

Seriously, guys, you couldn't hold off a day or so before releasing the depressing report? At least this time we could have gotten a decent night's sleep before you kicked us in the pants.