While most housing vacancy measures are still well above pre-bubble levels, the vacancy rate continued to edge lower in the third quarter, according to the Census Bureau. The overall year-round vacancy rate fell to 10.2 percent in the third quarter — down from 10.8 percent in the third quarter of 2011 and a peak of more than 11.0 percent in the trough of the recession. Other recent housing news was also overwhelmingly positive. The number of new homes sold in September was up 27.1 percent from its year-ago level; although, it is still only a bit more than half of the pre-bubble level.

The Case-Shiller 20-City index rose by 0.5 percent in August, the seventh consecutive increase. It is now up by 2.0 percent compared with the year-ago level. Price increases continue to be seen primarily in the bottom tier of the market, especially in the cities hardest hit by the collapse of the bubble. These sharp price increases at the lower end of these markets probably should be viewed with some caution. There are accounts in Phoenix and some of the other markets of bidding wars for properties in distressed sales. It is likely that these price increases are being driven by speculators who may not have a clear sense of the market, meaning some of the recent price increases could be reversed in the near future.

For a more in-depth analysis, see the latest Housing Market Monitor.