While I was going through the recent economic hoopla last night, there was one report that caught my eye. No, I ain't talking about the news that Dallas Cowboys QB Tony Romo is out for the season (sorry Dallas fans). What got me a lil' nervous and wet in the pants (I'm just kiddin' playas!) was the S&P /CS Housing Price Index report!

What the heck is the S&P/CS Housing Price Index?

Every month, our buddies over at Standard and Poors release a report that measures the change in homes prices of single families in 20 of the biggest metropolitan areas in the U.S. Every month, the monthly and annual rise (or fall) in home prices based on data collected from two months earlier. What this means is that if the report was released in October, the figures will reflect the increase (or decrease) in home prices from July to August.

What caught my eye in yesterday's report?

Normally, the S&P/CS HPI isn't regarded as a high impact report. But I've been keeping my eye on the housing market for a while now, and I don't quite like what I've been seeing. According to the index, housing prices fell by 0.3% in August, and marked the second straight month that prices have fallen. On an annualized basis, growth in home prices is now down to just 1.7%, after it had posted a figure of 3.1% the month before and 4.6% in May. Furthermore, 17 out of the 20 cities included in the index all posted yearly declines.

Tsk tsk. This normally wouldn't bother me so much as it is still posting growth on a yearly basis. But then again, the housing market was showing stronger signs of life this past summer. Prior to August, the index had shown four consecutive months of growth in housing prices.

What could be causing the decline in housing price growth?

It is obvious that the increase in home prices in the first half of this year was mainly caused by the government's first time home-buyers tax credit and the Fed's purchases of mortgage-backed securities (i.e. quantitative easing), and not by a "true" pick-up in consumer demand.

In fact, existing home sales in September was 19% lower from 2009 levels. From its peak in July of 2005, existing home sales has fallen a jaw-droppin' 79%!

Limbo! How low can you go?! I don't know about you, but these two pieces of data, as well as the elevated unemployment levels, tell me that recovery in housing demand is still way off. So far, house prices remain near its lows!

What could this mean for the U.S. economy?

We have to remember that the development of the housing market is a very touchy issue. Remember, it was the collapse of the housing bubble in 2007 that sparked the financial crisis. So whenever bad news comes out from the housing market, it causes traders to take a second look.

With the recent slew of data, does this mean that the U.S. economy is in for more bumps and ditches on its road to recovery? Unless the Fed finds a way to encourage promising figures in employment, consumer sentiment, and housing demand, then we just might see the dollar go further down in the pip deeps!