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Home prices on S&P/Case-Shiller index dip in June. That's a good thing.

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Jae C. Hong/AP/File

(Read caption) A sign in front of a home for sale in Whittier, Calif. Home prices in the US fell slightly in June, according to Standard & Poor's release of the S&P/Case-Shiller index of home prices for July on Tuesday.

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The housing market stumbled at the beginning of 2014, but it seems to have found its feet in recent months. Things have slowed a bit in July, but that may be a good thing.

US home prices dipped slightly in June, according to S&P/Case-Shiller’s monthly 20-city composite home price indices, released Tuesday. Overall, prices fell 0.2 percent from May and were up 6.2 percent from June 2013. Thirteen of the 20 cities saw home prices dip in June, and all 20 saw price growth slow year-over-year. 

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Meanwhile, another closely-watched monthly home price report from the Federal Housing Finance Agency (FHFA) showed prices inching 0.4 percent higher in June (unlike Case-Shiller, FHFA’s housing price index only covers home sales with mortgages guaranteed by Fannie Mae and Freddie Mac).

“This slowdown is one that we and many other analysts have been expecting,” Patrick Newport, US economist with IHS Global Insight, writes via e-mailed analysis. “It’s mostly a result of more homeowners, induced by higher home prices, listing their homes for sale. The slow but steady shift from homeownership to renting is also playing a role.”

The soft price increases come on the heels of a dip in new home sales, which fell 2.4 percent in July according to the US Census Bureau’s monthly report. New home sales reports are volatile measures, however, and are subject to drastic later revisions – the May and June reports were both revised upward, to a 9.9 percent gain and a 7 percent dip, respectively.

On the price front, at least, a slowdown can be a good thing, says David Berson, chief economist at Nationwide Financial, in a phone interview. The [year-over year] trend shows growth in prices is slowing,” he explains. “That’s a good thing because double digit house price growth,” like the US experienced in the early years of the recovery, “is not healthy for the market.”

“Ultimately, what is healthy are gains that are roughly equal to income growth, which tends to be about 4 and 4.5 percent,” he says. “Prices are still unsustainably strong, but not as much anymore.”

Still, there are some reservations, especially in an economy and a housing market that haven’t quite reached full strength. “Is the slowdown good or bad news? It’s both,” Mr. Newport writes. “To most homeowners, it’s not good news, especially if their homes are still underwater. To potential homeowners, it’s very good news. It’s also good news for those worry warts concerned about a second housing bubble.”

Pending home sales, which come out Thursday, should shed further light on the trajectory of the housing market through the remainder of the year. “The job market is better, mortgage rates have gone down some,” Mr. Berson says. "That suggests that home sales should be moving upward, and the pending sales should reflect that. I expect July to be up for those reasons.”