The latest  report(.pdf) on home prices coming from the S&P Case-Shiller Home Price Index confirms what has been known for some time now – in the absence of government largess in the form of $8,000 tax credits, home values are again dropping, down 0.2 percent from June to July and, more recently, down 0.3 percent from July to August.

The two tax credit induced price increases are clear to see in the graphic above – first in late-2009 and then again over the summer. With another government giveaway seeming to be off the table at the moment, the recent trend looks like it will continue, perhaps accelerating over the winter as traditional sellers take their homes off the market and distressed sales (at lower prices) increase as a percent of total sales.

The National Association of Realtors reported “another strong gain” in existing home sales last month, up from a 4.12 million annual rate in August to 4.53 million in September, a gain of 10.0 percent. As shown in the chart below, what we’re now seeing is the expected rebound from historic lows seen over the summer, that is, after the government stopped paying people to buy houses, the September sales total being one of the lowest in history.

The months of supply metric dropped from 12.5 to 10.7, about double the long-term average, which helps to explain why home prices are again falling, down from $178,600 to $171,700, a drop of almost four percent in a single month. Yikes! A better (though lagging) gauge of home prices will be available tomorrow when the S&P Case Shiller Home Price Index is  released, but it does appear that home price declines are now accelerating.

The Commerce Department reported(.pdf) that housing starts rose in September while permits for new construction fell, but both levels of activity remain near historic lows for a homebuilding industry that remains in an historic funk, not likely to recover anytime soon given the many millions of homes now in the “foreclosure pipeline”.

Housing starts rose 0.3 percent to an annual rate of 610,000, the highest level in five months but still 73 percent below the 2005 high and less than half of what might be considered “normal”. Building permits, a key leading indicator, fell 5.6 percent to a 539,000 rate, the lowest level since April of 2009 and the third worst reading on record.

In a Bloomberg report, Russell Price of Ameriprise Financial noted, “The worst of the housing market downturn may be behind us, but the path to recovery is likely to be long and slow”. After two years of clunking along the bottom near record lows with little hope of that changing anytime soon, that appears to be an understatement.

I know, this is a terrible artwork job, but it’s the thought that counts, and the thought here is that there’s something fundamentally wrong with the former Countrywide chief getting off with a fine that only takes away a fraction of the money that he made while selling Countrywide stock at the height of the housing bubble.

Details of how the Orange Man has avoided wearing an Orange Jumpsuit are in this story at Reuters, Bank of America (the TBTF bank that purchased Countrywide back in 2008 when the financial world was crumbling) reportedly picking up most of the bill.