Housing Bottom? "Not Even Close," Barry Ritholtz Says

A fifth-straight monthly gain for the Case-Shiller Index Tuesday and Monday's stronger-than-expected existing home sales report is giving renewed hope to the housing bulls.

"Disregard them," says Barry Ritholtz, CEO of Fusion IQ, who notes the existing home sales number was juiced by sales of cheap condos and various government programs. Meanwhile, the Case-Shiller results were below expectations.

We are "not even close" to a bottom in housing, says Ritholtz, who estimates national house prices remain 15-20% overvalued, based on the traditional metrics of: median income-to-median sales price, the cost of owning vs. renting, and housing stock as a percent of GDP.

"Until we start seeing a healthy housing market that can stand on its own, without government props, without distressed properties selling 60% off peak levels - that's how you know the bottom is in," says the blogger and Bailout Nation author. (Full disclosure: I edited Ritholtz's book and was paid for my contributions.)

The likely best-case-scenario for housing is several years of sideways action for prices, wherein population growth and a firmer economy combine to sop up the still huge inventory of homes on the market.

"And that's if we're lucky," Ritholtz says, citing the lackluster environment for jobs and wages, as well as CoreLogic's analysis that 23% of all U.S. mortgage holders are under water, as reported in The WSJ. With so many Americans owing more money than their homes are worth, the recent rise in foreclosures and so-called jingle mail is "not nearly done," he warns.

In sum, expect more homes for sale at distressed prices and more downward pressure on prices overall -- unless the "real" economy shows dramatic improvement, which Ritholtz doesn't see anytime soon, as discussed here.