Are Things Looking Up for the Housing Market?

Key national indicators for housing are improving, but regional pockets still lag.

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For-sale home inventories are dropping nationally while median sales prices are rising, according to new data released Wednesday, a rare but encouraging sign of renewed optimism in America's feeble housing market.

Inventories declined 3.48 percent from September to October, according to Realtor.com, and are down 20.77 percent from one year ago. Median list prices, which have remained essentially unchanged since June, were up 2.65 percent nationally year over year.

"These developments can be viewed as a positive sign that the market has stabilized and in some parts of the country, has begun to recover," the report said. "Lower inventories combined with generally stable list prices can be seen as a positive sign that the overall market is holding its own."

[See a slideshow of 10 turnaround housing markets.]

To be sure, there's still plenty of variation across the country. After all, real estate is nothing if not hyper-local. Markets remain fragile, particularly those with high unemployment rates and large numbers of seriously delinquent borrowers, which threatens to add to an already gigantic shadow inventory.

Although the number of seriously delinquent loans has declined steadily for the past few months, foreclosure rates have begun to rise. Further erosions in the economy, continued price declines, and increasing numbers of foreclosed properties entering the market could undermine the stability that has recently been observed.

Still, some markets have begun to rally and show nascent signs of recovery, even as others continue to struggle. Parts of Florida, some of the hardest hit by the housing market decline, have consistently posted improving list prices and reduced inventories. Indeed, median list prices remain well below their pre-crisis peaks. Florida held the top five spots for markets with the largest year-over-year median list price increases in October. The Fort Myers and Miami metro areas saw the largest year-over-year increases, posting 33 and 25 percent price upticks respectively.

On the flip side, markets at the epicenter of the original housing market implosion—Las Vegas and parts of California—continue to lag. In addition, markets such as Chicago and Detroit, which didn't see the meteoric run-up in building and home prices, are now experiencing some of the most severe price declines. Home prices in those midwestern cities sunk almost 13 and 11 percent respectively.

[Read: Where Builders Are Breaking Ground.]

The median age of home listings rose slightly in October from 107 days to 110 days, but was still almost 2 percent off the median age one year ago. Experts say seasonal sales volatility is responsible for the monthly increase, but homes in many markets still aren't moving, particularly those in resort communities and some industrialized areas that have felt the worst of the sustained economic downturn.

Parts of the Carolinas have the longest media days on market at upwards of 168 days. Only two of the 146 markets surveyed in the Realtor.com report—Denver and Oakland, Calif.--had inventory ages of less than 60 days.

While the housing market still has a lot of ground to make up, key indicators are beginning to point in the right direction, experts say. Regional variation will persist as some markets fare better and others lag due to external economic pressures and the continuing fallout from foreclosures, overbuilding, and homeowners with negative equity.

Most experts don't predict housing prices to hit bottom until 2012 at the earliest, but with improving fundamentals, the housing market could get a head start on the path to recovery.

mhandley@usnews.com