Published: Monday, 9 Nov 2009 | 10:23 AM ET

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On the way down and on the way up, home prices always lag sales, but they may be beginning to catch up. A new report from Zillow.com finds home values stabilized in the third quarter of this year, as sales of new and existing homes grew. 

AP Home sales

"While 116 metropolitan areas experienced Q3 year-over-year declines in home values, only nine metropolitan areas saw accelerating year-over year home value declines," according to the report.

That is resulting in slightly improved negative equity. Zillow finds 21 percent of single-family home owners are in a negative equity position in Q3, as compared to 23 percent at the end of Q2.

The question remains if this is a real trend or a temporary surge brought on by non-organic factors. The first-time home buyer tax credit added an additional 350,000 buyers to the housing market, according to the National Association of Realtors, and the Federal Reserve's investment in Fannie Mae and Freddie Mac mortgages and mortgage backed securities have kept mortgage rates artificially low.

And then there's the foreclosure quandary. Zillow estimates more than one fifth of all sales in September were foreclosure re-sales, up from 15 percent a year ago. Realtors have put that at a higher number.

But the fact is that foreclosure inventory is diminishing, thanks to more efforts to modify borrowers, which are slowing down some of the inevitable. That's pushing prices on the low end higher, and the low end is where all the activity is. In September, the National Association of Realtors reports that nearly 70 percent of all sales were on homes priced $250,000 or lower.

Home values are still worst in the local markets that saw the biggest housing boom and bust. These are in California, Florida, Arizona and Nevada. The best performing zip codes are in areas with more stable employment, that did not see huge home price appreciation during the housing boom, like parts of North Carolina.

Last week President Obama signed into law an extension and expansion of the home-buyer tax credit, opening it to some move-up buyers and moving the expiration date to May 1, 2010. 

Most analysts say the extension will not have near the impact the initial credit did, because demand was pulled forward in advance of the first expiration date. In other words, we saw the tax credit bump over the summer, and now, as we head into the traditionally most sluggish housing season, the credit isn't going to help much.

Home prices have stabilized and in some regions begun to rise a bit, but foreclosures, unemployment and still weak consumer confidence are warning signals that they could dip yet again. 

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Calculators and Advice from Bankrate.com:

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