PhotoGenerally, when the price of something goes up it isn't considered good news. The exception to that -- at least at this point in our economic history -- is the price of residential real estate. Homeowners, Realtors and economists all cheer when that happens.

Lately there has been a lot of cheering. Home prices have been rising steadily since the beginning of the year. The latest evidence to suggest that trend is continuing is today's report from the Federal Housing Finance Agency (FHFA), which notes U.S. home prices ticked up 1.1 percent from the second quarter to the third quarter of this year.

When measured year-over-year, the increase is even more impressive -- 4.4 percent. The calculation was made using data from Fannie Mae and Freddie Mac mortgages.

Continuing a trend

“With significant growth in home prices during the quarter and a modest inventory of homes available for sale, house price movements in the third quarter were similar to what we observed in the spring,” said FHFA Principal Economist Andrew Leventis. “The past year has seen consistent price increases, but a number of factors continue to affect the recovery in home prices such as stagnant income growth, high unemployment levels, lingering uncertainty about the macroeconomy and the large number of homes in the foreclosure pipeline.”

As prices rise, homeowners who have been underwater since the 2008 housing collapse are a little less so. Those who have been on the line between equity and no equity are getting in a position where they may soon be able to refinance their mortgages, or sell their homes. Millions of people in that situation have been unable to take advantage of record low mortgage rates because they have been unable to refinance.

Reason for optimism

That's why economists cheer the news of rising home prices. If an increasing number of homeowners are able to lower their monthly payments, more money will be available to spend in the economy and pay down other debt.

As measured with purchase-only indexes for the 25 most populated metropolitan areas in the U.S., third quarter price increases were greatest in the Phoenix-Mesa- Glendale, AZ, Metropolitan Statistical Area (MSA). That area saw prices increase by 7.2 percent between the second and third quarters.

Prices were weakest in the Edison-New Brunswick, NJ, metropolitan division, where prices fell 2.2 percent over that period.

The monthly seasonally adjusted purchase-only index for the United States has increased for eight consecutive months. FHFA said it believes much of the recent price gain is attributable to decreases in the share of distressed sales in the latest quarter.

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