Want to have some fun with the latest news? Go to the government’s housing price databank and get a much clearer picture of the situation than the headlines will give you. Today’s headlines are blaring that home prices just recorded their biggest drop ever—minus 4.8% this past quarter. Oh woe, oh woe. In the gloom, reports barely mention that a few states are showing some mild improvements in prices.

But wait! If you are thinking this is terrible, stop and reflect. You could be falling into the same error that people looking at Ford’s old price chart are making.

We have a tendency to think that a past high was properly achieved. If all goes well, a stock… indeed housing stock… will get back to that hallowed spot where it “belongs.”

The government named its housing office the Office of Federal Housing Enterprise Oversight (OFHEO—even its initials aren’t clever). Despite the clunky name, though, the website is pretty cool. You might want to look at trends in your home state. While you are at it, check out California, the poster child for falling home prices.

Yes, California’s average home price fell 15.8% in the second quarter of 2008. If that represents the sky falling, those clouds are still in the stratosphere. If you look back, you will see that in 2005 California home prices rose (from the first quarter to the fourth) 26.2%, 25.6%, 20.2% and 21.1%. That comes to a 131% increase in the price of a California home in one year! The trend continued into 2006 with another 18.3%, 13.8%, 9.03% and 3.94%. That’s a 252% gain in two years.

Clipping a mere 16% off that trend is like trimming the eyelashes on a poodle. Check the website and see how your state is doing: http://www.ofheo.gov/hpi.aspx

Source: Look Deeper Into Housing Numbers And You Will See A Different Picture