Today's release of the Case Shiller home price index (CS) show that prices fell a better than estimated 11.3% year-over-year and actually increased 1.2% from the prior month. We can expect all the perma-bulls to climb atop their soapboxes and declare that housing and the economy have finally turned positive and the stock market will continue marching higher. At the center of their argument is the belief that a slowing rate of decline, where economic data is less bad, equates to good news. I have never agreed with this view and a deeper look at the data explains why.

As first outlined in my weekly newsletter EPIC Insights, the 11.3% year-over-year decline is the lowest since January, 2008 and the month-over-month increase is positive, but the Case Shiller Index still remains 29% below its 2006 peak and 3% lower on a year-to-date basis. Examine other housing data and the story is the same. New home sales tomorrow are expected to increase to 440,000. This would be the sixth consecutive monthly increase. However, when you consider the average going back to 1963 is 688,000 and that 440,000 is where new home sales bottomed in every prior recession, the data is not encouraging.

The improvement we have seen in recent months is nothing more than the economy moving from terrible to bad. The eventual step to good is well down the road and when we evaluate what gave stability to the housing market, caution is warranted.

If artificially low interest rates, home buyer tax credits, and foreclosure moratoriums could not drive prices higher and lead to a boom in home sales, what hope is there for a stimulus-free recovery? As the aftermath of the cash-for-clunkers program showed, when the government stops supporting consumption, sales collapse. With most of the housing stimulus set to expire in coming months, those who think a pending leap in housing prices is imminent should reconsider. As I often say, less bad is not the same thing as good.