The January Case-Shiller home price index released today reaffirms the expectations that house prices have reached their bottom in most of the country but that a significant rebound is not in the cards.  Monthly seasonally adjusted prices were up for the eighth straight month and annual changes continue to be less negative.  The FHFA index that was released last week did not show as positive a picture.  In addition to underlying definitional differences in the indexes, the dissimilar results are also a product of a fragile housing market where a significant portion of sales are to investors grabbing bargains and first time home buyers taking advantage of the credit.  Even though the indexes correct for quality differences by measuring price changes of the same home, the transactions being recorded are primarily at the lower end of the market where competition remains intense and changes from a very low level can flip flop back and forth between negative and positive.

As the housing market slowly recovers and more sales occur between actual occupants and across a broader spectrum of home values, the indexes will settle down to a more predictable trend.  Pent up demand that has been delayed for up to three years will return and take the place of the current tax incentives.