Standard & Poor’s released the S&P/Case-Shiller Home Price Indices today with the headline for the press release announcing broad-based declines in house prices in the third quarter of 2010. That’s true, the numbers don’t lie, but a little perspective is helpful in understanding today’s release.

The national index is down 2 percent in the third quarter after rising 4.7 percent in the second quarter, but down 1.5 percent from one year ago, but up from 6 months ago and up from 15 months ago. The 10-city and 20-city composites are down from July highs, but above earlier months since the early 2009 trough. The important point is that all three indices show both volatility and an upward trend since bottoming out in early 2009. Today’s numbers do not seem to imperil that underlying trend. (See chart.)

Another aspect to keep in mind is that the indices are three month averages. The September release is based on July, August and September. These third quarter (post-tax credit) declines following second quarter (tax credit supported) increases should come as no surprise. A firming up of prices as we move further from the summer lull should also be no surprise.

One final consideration is the geographic diversity behind the numbers. Looking at the individual cities included in the 20 city composite and considering the entire period since early 2009, the most vulnerable cities are Phoenix, Miami, Tampa, Detroit and Las Vegas. These are markets that had the biggest price bubbles and the least improvement since the collapse. This conclusion doesn’t really jump out of today’s release. The real surprise among the individual cities is how well the California markets of Los Angeles, San Diego and San Francisco have done since the trough.

The bottom line is that today’s headline numbers are technically correct, but gloomier than the reality. Given the recent volatility in the indices and the progress made from the bottom, a more accurate characterization of today’s release would be that in spite of some market-specific fluctuation house price improvement is excepted to continue.