Every time a housing statistic emits a faint heartbeat - last week's 6.3 percent increase in April's pending home sales index, for example - there's a flurry of pronouncements that the residential real estate market has bottomed.

Hope springs eternal. Housing has been down so long it looks like up, especially with the graph turned upside down.

New and existing home sales peaked in July and September of 2005, respectively. It took a while for home builders to catch the drift: Starts didn't top out until January 2006, leaving a huge inventory of unsold homes in their wake.

Single-family starts, which are the most sensitive to changes in interest rates, are down 63 percent from the January 2006 peak, easily topping the 38 percent peak-to-trough decline in 1973-1975 and 57 percent 1984-1991 dive, and vying for first place with the 65 percent plunge in 1977-1981.

No wonder home builders are glum. In a departure from normal practices, the National Association of Homebuilders elected to release its monthly builder survey to the media via conference call Monday. I received so many advance e-mail alerts I was starting to wonder whether the index had sunk to zero in June, and the group wanted to soften the blow.

Results 'Pretty Troublesome'

The quantitative results weren't that bad: The housing market index fell 1 point to 18, matching the all-time low of December 2007.

The qualitative context was awful. David Seiders, the home builders group's chief economist, called the "persistence of the low level" of the index, a measure of housing demand, "pretty troublesome."

The index "has been in a tight range for a 10-month period," he said, "unlike the 1990s, when there was a quick rebound. None of the news is encouraging at this point."

As downbeat as Seiders was on June's survey results, the builder responses preceded "the run-up in interest rates," he said. "I haven't factored that into the outlook yet. The risks are piling up to the downside."

Although home builders are pressuring Congress to enact a tax credit for first-time buyers, they are resisting the one thing that requires no legislative action to spark buyer demand, according to Thomas Lawler, founder of Lawler Economic and Housing Consultants in Leesburg, Va.: cutting prices.

"Builders are reluctant to do that" to compete with the growing volume of distressed sales of properties in various stages of foreclosure, he said.

In Southern California, for example, one of the areas where the bubble started early and ended hard, median home prices are down 27 percent in the past year, Lawler said.

"If you look at observed transactions on distressed sales, you could make a case that we are closer to a bottom because prices have plunged so rapidly," he said. "But that's no solace to nondistressed prices."

In Florida, another epicenter of the boom-bust in real estate, "sales are 20 to 30 percent below year-ago levels, but prices haven't moved very much," Lawler said.

Builders have been reluctant to slash home prices for fear of alienating previous customers and encouraging current buyers to wriggle out of their contracts.

"Once clearing prices are way down, you can't attract buyers with granite countertops and gold trim," Lawler said.

Foreclosures rose to a record 2.47 percent in the first quarter, according to the Mortgage Bankers Association.

More Inventory On Its Way

Using the bankers association and other data, Lawler calculates that there are 1.34 million first-lien mortgages in the foreclosure process, which amounts to 27 percent of the inventory of existing unsold homes. A year ago, foreclosures represented about 18 percent of the unsold inventory, he said.

As scary as that number sounds, so far it's just on paper. It takes about a year for today's foreclosures to be dumped on the market, adding to the already-bloated inventory of unsold homes, according to Michael Carliner, an independent housing economist in Potomac, Md.

The foreclosure process varies from state to state and in the length of time it takes from the first default notice to the assumption of the title of the property by the bank.

A few relationships are constant. New home sales lead housing starts. It is residential construction starts that contribute to gross domestic product. Housing's drag on growth won't lift until builders whittle away their backlog. Lower prices seem to be the quickest means to that end. (At lower prices, the quantity demanded increases.)

"We are unlikely to see a sustained increase in nationwide new home sales until builders are willing to cut prices to match the plunge in the prices of existing homes in seriously distressed areas," Lawler said.

If and when they do, you might not have to turn the home sales graph upside down to see the improvement.

Caroline Baum is a Bloomberg News columnist.