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Those seeking a home-price bottom should beware that price gauges can send false signals.

On Tuesday, the National Association of Realtors releases May home-resale data. Economists expect an annualized sales pace of 4.8 million units, down 33% from May 2005, near the bubble’s peak.

Wednesday brings Commerce Department data on May new-home sales, and economists see an annualized pace of 360,000 units, down 72% from May 2005.

Both reports will include pricing information, helpful for seeing how much pain homeowners have suffered and how much more banks will lose on their mortgage-backed securities.

Happy pricing news has been scarce. Median new-home prices fell 14.9% in April from a year ago, nearly matching the worst decline of the housing bust.

Things have been slightly more promising for existing homes, where median single-family home prices also fell 14.9% in April, an improvement over January’s record 16.7% decline.

Alas, that small uptick was merely “noise,” says NAR chief economist Lawrence Yun, who wants to see three more such months before declaring price stabilization. Even then, Mr. Yun warns, investors shouldn’t assume that home prices are rising broadly.

I am honestly glad to hear the NAR saying this…backs up various conversations we have been having with our inside lender contacts…who are concerned that todays ‘investors’ will be tomorrows foreclosures as they walk away from their newly bought ‘investments’ because they lost value. Recent history has proven that many homeowners will walk on their homes (investors included) when the home is upside down by 10-20%.

The trouble, notes Ivy Zelman, chief executive of housing research firm Zelman & Associates, is the NAR’s sample will increasingly include more-upscale homes as a glut of distressed, low-priced houses leaves the market.

Lately, as much as 50% of home resales have been foreclosures, and most have been lower-priced homes.

Now the foreclosure vortex is gripping higher-priced homes. A house that sold for $600,000 during the boom and $400,000 in foreclosure will be recorded by the NAR as a $400,000 sale, lifting the national median but suggesting no real improvement in housing.

We reported on this months ago…the Alt-A non-subprime borrowers are headed towards foreclosure at a HIGHER % rate compared to what we have seen thus far…

“It will be very difficult for investors watching the median existing-home price to realize it could be masking deflation at higher parts of the housing food chain,” says Ms. Zelman.

The Standard & Poor’s Case-Shiller price indexes, updates of which are due next week, have their own issues, but track repeat sales of the same house and might better reflect the true losses of banks, mortgage companies and homeowners.

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