For the 4th consecutive month, the Case-Shiller Index showed a softening in year-over-year home price declines.  As a standalone story, this is news.

Even more relevant to homeowners than the annual Case-Shiller numbers, though, are the monthly ones.   According to the data, 18 of the 20 tracked markets improved between April and May 2009.  It's the Case-Shiller Index's strongest showing in nearly 3 years and yet another sign that housing is on the mend.

That said, the Case-Shiller Index is far from perfect:

1. Case-Shiller measures home values in just 20 U.S. cities.  Those 20 cities represent but 9% of the U.S. population.
2. Case-Shiller on a 2-month delay.  It is not reflective of the current state of housing, but of the way is was.
3. Case-Shiller ignores the "all real estate is local" adage.  It lumps disparate city and suburban neighborhoods together.

Despite these flaws, though, the Case-Shiller Index remains relevant to housing.

Remember -- stock markets tanked as housing went bad in 2007 and 2008.  Americans lost their savings and their homes.  Huge, historied banks went bankrupt and Fannie Mae and Freddie Mac got nationalized.  Today, a lot of people believe that rising home values could undo some of that damage.  Maybe even most of it.

And this is why the Case-Shiller Index -- however imperfect -- is still so important.  Its recent strength is surprising and may be foreshadowing the end of the U.S. economic recession.  As home prices go, so goes the economy and, recently, home prices have been rising.

All in all, it's just another brick in the housing recovery wall.

Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.