According to Case-Shiller, housing prices in 20 large metropolitan areas fell, on average, in the months of May, June, and July, following over two years of steady and impressive gains (the index is calculated monthly using a three-month moving average and published with a two month lag). I doubt this is the beginning of another major downturn in prices—it's much more likely to be just a "pause that refreshes." That's because mortgage rates remain very affordable, the economy is still growing, personal incomes are still growing, and the Fed hasn't tightened monetary policy. (see charts below)
Case-Shiller also reports a series of housing prices in 10 major metropolitan areas which extends back to 1987. Here we see that real home prices have only increased at an annualized pace of 1.7% in the past 27 years, and prices today, in real terms, are about the same as they were in 2002. Real incomes, in contrast, are up at a 2.7% annualized pace over the same period. Couple that with the fact that mortgage rates today are 4-4.5%, whereas they were twice as high in 1987, and you find that housing prices are much more affordable these days.
It's a good thing that the housing market has cooled off somewhat, since that will give folks like my daughter and her husband a chance to search for and bid on a home in a less-frenetic atmosphere. They were beginning to think that they had missed the affordable-housing train.
The first of the above two charts compares the increase in housing prices since 1987 with the increased cost of renting a home ("homeowner's equivalent rent," which gets a weighting of about 25% in the Consumer Price Index). Home prices have only slightly outpaced the increase in rents in the past quarter-century. The second chart shows how the rise in home prices tends to feed into the calculation of the CPI with a lag of about 18 months. The recent pause and decline in prices is likely going to moderate the rise of the CPI over the next year or so.