Published: August 25, 2009

This can go in the “good news” file, sort of: The rate of U.S. home price decline definitely stopped accelerating in the second quarter. That’s the word from the June edition of the S&P/Case-Shiller Home Price Index.

National home prices registered a -14.9% decline from the second quarter of 2008 to the same time in 2009. While that’s hardly worth celebrating, it’s way better then the record -19.1% year-over-year fall in the first quarter.

As the chart shows, it ain’t as bad as it used to be. But at the same time, home prices are still at early 2003 levels. You could call this a housing rebound, but it’s more like a deceleration.

“It’s an impressive turnaround. This is a huge, sudden upward swing,” says Robert Shiller, whose namesake is attached to this index. “I think it might mark a change in trend.

“But I didn’t say we’ve reached a bottom. It’s just suggestive of a turning point. We’ve seen other corrections like this reverse. We really don’t know the future….

“Our UMM [one of Shiller’s tradable housing market securities] is still not predicting any major increases going out five years. It’s predicting now that in five years, home prices will be +6% higher than they are now. That is not a huge recovery.”

What’s more, the “cure rate” on ailing mortgages is plummeting. According to a Fitch study released today, between 2000-2006, an average 45% of prime mortgage holders who fell behind on a monthly payment were able to catch back up the next month.

In July, that “cure rate” was 6%. We reiterate, that was for the best, prime-level borrowers. Alt-As went from an average 30% to 4%. Subprimes shrank from 19% to 5%.

“Cure rates have really collapsed,” commented Roelof Slump, Fitch’s managing director. Yeah, that’s safe to say. Not only does this give us pause in celebrating a housing comeback, but it reinforces a trend we’ve been pounding the table about over the last month or so: This isn’t about subprime anymore.

For further proof, check this out… some of the fine print from last week’s existing home sales data:
 

The NAR boasted a +7.2% leap in existing home sales for July last week, the biggest month-to-month gain since they started keeping track. But with the overwhelming majority coming from foreclosures, distressed sales and the lowest of the low end… what does it really say about the true state of U.S. housing?

-- Ian Mathias
Managing Editor
AgoraFinancial.com

Editor's Note: This article originally appeared in Daily Reckoning.