Home prices in May were down 7.4 percent year-over-year, according to a new report from CoreLogic. This is the first of the May numbers, as SP Case Shiller, which was released earlier this week, looks back two months.

CoreLogic’s [ CLGX 16.71  +0.13 (+0.78%) ] report is unique, though, in that it gives the big bad number (which was a bigger dip than the 6.7-percent annual drop in April) and then it strips out the distressed sales and comes up with a new number. Distressed sales include foreclosed properties (bank-owned/REO) and short sales, where the home is sold for less than the value of the mortgage to avoid foreclosure.

Without the distressed sales, home prices fell just 0.4 percent in May, essentially flat. Overall, according to the report, “including distressed transactions, the peak-to-current change in the national HPI (Home Price Index, from April 2006 to May 2011) was -32.7 percent. Excluding distressed transactions, the peak-to-current change in the HPI for the same period was -21.2 percent.”

So should we consider that home prices are really just fine? After all, they might not be moving up, but they’re not falling, and they’re down far less than the headlines scream.

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