If the economy is improving, how come house prices are still falling?

The widely quoted Case-Shiller home price index reported another national decrease in house prices. Sixteen of 20 cities measured saw prices drop in February from the previous month. Prices in 15 of 20 cities were lower than the year prior.

National house prices have now fallen 35 percent from their peak and are back to late 2002 levels. Prices in nine cities are at the lowest recorded yet.

This is good news for renters and those who would like to be able to purchase a house.

The Associated Press reports that we may be nearing a housing bottom since the rate of price decline is slowing.

Robert Shiller, co-creator of the index, said on Tuesday, however, that he worries there might be no recovery for a generation. “I worry that we might not see a really major turnaround in our lifetimes,” he said.

At the very least, he says, suburbs are probably doomed because rising gas prices are driving people back into the cities.

The direction of home prices has a big effect on the economy. When prices go up, homeowners not only spend more, but more houses are built and more transactions take place. This puts a huge number of bankers, brokers, real-estate agents, title companies, plumbers, electricians, contractors, inspectors, etc. into action.

When prices fall, the opposite occurs.

In the years leading up to the great crash in 2008, something like 40 percent of all jobs created in America were related to housing-type activities. These jobs don’t look like they are coming back any time soon.

But without more jobs and falling unemployment, what will drive a recovery in house prices?

The bubble has popped, and it will take years to recover—if that is even possible.