With its focus on 20 major housing markets, the S&P/Case-Shiller home price index has become the chronicler of the lost fortunes of homeowners and builders alike. In 2008, housing values plunged a record decline of nearly 20%, according to Case Shiller, with some markets (Phoenix, San Francisco, Las Vegas) suffering  hits of more than 30%.

But Case-Shiller might be on the verge of providing some positive housing news, according to one analyst.

Eric Landry, an associate director at Morningstar, suggests that Case Shiller’s May numbers (which will be released Tuesday, July 28) might be the first of several months of sequential increases—rather than continued declines—in its two major indices. He predicts that the May Case-Shiller 10- and 20-city indexes could be up by more than 1% each, compared to April data. 

Landry bases his forecast on his own calculations and comparisons between Case Shiller, real-time median prices from Housingtracker.net, and multiple-listing service data from Altos Research. 

“Month-to-month changes in median listed home prices in several of the Case-Shiller cities have recently turned positive for the first time in several years,” he explained in a report this spring. “The correlation between a data set we assembled using these real-time median prices and the published Case Shiller indexes is such that we believe there’s a material chance both the Case-Shiller 10-city and the Case-Shiller 20-city indexes may enjoy their first sequential price gains since 2006 in the next couple of months.”

(Case-Shiller’s 10-city composite tracks home prices in Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, and Washington, D.C. The index’s 20-city composite follows home prices in the 10 cities above, plus Atlanta, Charlotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix; Portland, Ore.; Seattle, and Tampa.)

“One of the reasons for our optimism is that inventories in several of the hardest-hit areas have declined to a point where some regions are enjoying price stability after 30% to 50% peak-to-trough declines,” Landry said. “Sales are increasing in many areas as well, as buyers take advantage of the best affordability in a generation.”

Multiple sources in recent weeks seem to support Landry’s thinking. Real estate consultant John Burns reported earlier this month that prices seem to be stabilizing in Washington, D.C., and California. Public builder NVR posted new orders of more than 2,700 for the quarter ending June 30. Both new-home and existing sales jumped in June, according to the Census Bureau and the National Association of Realtors.

If Case-Shiller does post a monthly gain tomorrow, does that mean housing finally has hit bottom? That’s hard to know, and the answer may vary based on the individual geographic market.  “Although it's still not entirely clear whether or not this bounce will be sustainable,” Landry acknowledged in his July 21 report on forecasting the Case-Shiller improvement, “there's increasing evidence that the residential real estate market is healing itself in some parts of the country, even in the face of very high unemployment and unprecedented foreclosure activity.”

Alison Rice is senior editor, online, at BUILDER magazine.

Learn more about markets featured in this article: Los Angeles, CA.