When it comes to the current housing recovery, never assume the path leads straight up.

That's just not the way it's playing out.

As the economic and real estate numbers this week suggest, it's more like two steps forward, one step back, one step sideways.

The new quarterly home price numbers released last week by Standard & Poor's Case Shiller index show we're headed toward gradual improvement on a national basis -- and a lot better than that in key metropolitan markets.

On a seasonally-adjusted basis, Case-Shiller's 20-city index was up three tenths of a percent -- the seventh consecutive monthly improvement in pricing. Fifteen of the 20 cities in the survey posted positive price appreciation last quarter.

Check out some of the increases Case Shiller measured in the largest urban markets -- a five percent gain year over year for prices in San Francisco, three percent for the year in Dallas and San Diego, plus higher than average jumps in metropolitan Washington DC, Boston and Denver.

Even hard-hit Las Vegas and Phoenix saw small increases in the new report, despite the ongoing high percentage of total sales transactions involving defaulted and foreclosed properties.

Mortgage giant Fannie Mae also came out with its latest forecast -- and sees gradually improving conditions in the months ahead.

Fannie's chief economist Doug Duncan said that despite temporary setbacks in sales in any given month, the underlying reality in the marketplace is that the employment situation, slowly but surely, is getting better, and is likely to continue to do so.

Duncan is particularly impressed by the creation of 540,000 new jobs for households nationwide in January, and a shift by employers away from part-time positions to full time.

"The upswing in employment data means positive news for economic growth," said Duncan. "Better financial strength for households makes it easier for people to make payments and more likely they'll buy houses."

Okay, that's the bright side of the picture this week. Now for some sobering, one-step-backwards news: Builders saw sales of newly-constructed homes in January plunge by 11 percent - hitting their lowest level in decades, according to the Commerce Department.

No question that some of that was caused by the bad weather that pounded much of the country recently. But part of the steep decline also signals caution on the part of potential buyers, who still aren't sure whether we've seen the bottom in prices.

Mortgage rates certainly aren't keeping buyers away, though. Thirty year fixed rates averaged just over 5 percent last week, according to the Mortgage Bankers Association, while 15 years rates averaged 4.4 percent.

Published: March 1, 2010

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.