NEW YORK ( TheStreet) -- Call it a tale of two timetables for the U.S. housing market. There's a short-term saga where the dreaded "fiscal cliff" could knock U.S. home values to the canvass with one blow. Over the long term, though, the housing picture brightens, with home value rising a reasonable 3.3% annually through 2017. That's the outlook from the most recent Fiserv Case-Shiller Index, released today. The index studies housing trends in 380 U.S. markets, where the data this quarter point to a "path of slow but sustainable" recovery, according to Fiserv ( FISV). The index says the U.S. housing market has finally, and officially, left the Great Recession and resulting home values collapse behind it -- even though that collapse is still closer than you might think in the rearview mirror. U.S. home prices, on average, have risen 1.2% from the third quarter of 2011 to the third quarter of 2012. Fiserv says it's the first average annual increase since 2006, just before the economy slid into a major downturn. The index calls the most recent home selling season (spring and summer) the "strongest since the peak of the housing bubble." "There is now strong evidence for a slow, sustainable recovery on both the supply side and the demand side," explains David Stiff, chief economist at Fiserv. "On the demand side, existing home sales increased to their highest levels since 2007, save for the sale spikes caused by the homebuyer tax credit. At the same time, supply is decreasing. Inventories of unsold homes are now 20% lower than they were last year." Stiff says the all-important shadow inventory of U.S. homes, which analysts link to foreclosed homes, is also in decline. In general, a drop in foreclosed properties boosts the value of nearby homes, and now the U.S. economy is seeing more of that. "Shadow inventory, which includes properties in pre-foreclosure or foreclosure, continues to decline," he says. "New foreclosure activity has hit a five-year low, reducing the number of foreclosed homes for sale. In many markets, limited inventories are holding back sales activity as potential buyers are unable to find properties to purchase, pushing up home prices as buyers compete for a dwindling supply of homes for sale." That rosy scenario could show some thorns if Congress and the White House can't agree on an economic plan to aver the so-called fiscal cliff, scheduled to appear Jan. 1 when major spending cuts from last year's debt negotiations are set to trigger, as are the sun-setting of the Bush tax cuts from 2001 and 2003. Fiserv Case-Shiller estimates that the resulting economic slowdown, if the cliff issue isn't addressed in Washington, will result in a "weaker" housing market in the spring and summer of 2013. "In some markets, investor demand for housing will start to fade before first-time and trade-up buyer demand has ramped up enough to take its place. This will be most evident in markets with large foreclosure inventories," Stiff says. "Currently, investors are snapping up foreclosed properties almost as quickly as they are being listed for sale, but the pool of investors is limited and, as prices rise, the potential returns on residential real estate diminish. Consequently, Fiserv Case-Shiller projects a small, short-term price decline for many markets that recently experienced double-digit appreciation." The good news is that Fiserv-Case Shiller sees the fiscal cliff issue as a "hiccup" for the housing market, and that even with the cliff in play, the housing market would be set to rebound in the second half of 2013. Overall, the index pegs the annual rate of growth at 3.3% from this year to 2017. "As consumer confidence improves and people become convinced that home prices have stabilized, demand from first-time and trade-up buyers will return to normal, ensuring a sustained housing market recovery," the index says. That's quite the table-setter from Fiserv-Case Shiller. If the housing market can shake the fiscal cliff issue, housing growth over the next five years might just put a serious dent in the damage done by the losses homeowners incurred over the past five years. Finally, it seems, the U.S. housing is trending in the right direction - even if there is a cliff in its path.