NEW YORK (MainStreet) – It didn’t start out as a good week in the housing sector, but it might end up that way.

On Monday, word came from the National Association of Realtors that pending home sales in the U.S. fell by 1.3% in July (although home sales activity is still well ahead of the pace set in July 2010).

Lawrence Yun, NAR’s chief economist, says there is still plenty of room for improvement. “The market can easily move into a healthy expansion if mortgage underwriting standards return to normalcy,” he notes. “We also need to be mindful that not all sales contracts are leading to closed existing-home sales. Other market frictions need to be addressed, such as assuring that proper comparables are used in appraisal valuations, and streamlining the short sales process.”

Today, the news got better, as the S&P/Case-Shiller data through June 2011 showed that U.S. home prices rose by 3.6% in the second quarter of 2011. That followed a 4.1% decline in the first quarter (as measured by S&P’s National Home Price Index), and was the biggest quarter-to-quarter rise in home prices in years. Still, that only brought home prices back to 2003 levels.

But at least the market seems to be stabilizing, as 12 of the 20 U.S. cities covered by the index reported higher home prices now for three consecutive months – a welcome trend to homeowners, realtors, and economists alike.

“This month’s report showed mixed signals for recovery in home prices, says David M. Blitzer, chairman of the index committee at S&P Indices. “No cities made new lows in June 2011, and the majority of cities are seeing improved annual rates.”

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What should please housing industry observers most is clarity about the “housing bottom” – a deep, dark place where the housing market needed to go before it could start rising again. That looks like it may have happened, at least in some U.S. regions, as Blitzer tells it.

"Looking across the cities, eight bottomed in 2009 and have remained above their lows,” he adds. “These include all the California cities plus Dallas, Denver and Washington, D.C., all relatively strong markets. At the other extreme, those which set new lows in 2011 include the four Sunbelt cities – Las Vegas, Miami, Phoenix and Tampa – as well as the weakest of all, Detroit. These shifts suggest that we are back to regional housing markets, rather than a national housing market where everything rose and fell together.

Further bolstering the market were home closing numbers in New York City, a leading indicator for housing. Stronger numbers from Chicago, Cleveland and Washington, D.C. also fueled a rise in the index, S&P reports.

The market is definitely starting to see a trend here. Besides the Case-Shiller Index, both CoreLogic and the Federal Housing Financing Agency reported higher home prices since the spring.

And that’s a good sign. As the experts say, we’re not out of the woods yet – after all, a good chunk of these sales are coming from foreclosures and short sales. But for now, we can at least see glimmers of sunlight through the trees.

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