There is an old investing bromide that goes “the trend is your friend,” which means a directional market can lead to riches.

The trend in home prices is surely our friend. Indeed, the S&P/Case-Shiller home price index points to a trend that is becoming friendlier by the month. Case-Shiller's data show that home prices gained 0.9 percent month over dollar housemonth for June, posting a fifth-consecutive monthly gain. Just as important, price increases were widespread, with 18 of the 20 metropolitan regions Case-Shiller follows moving higher.

Most of the media commentary on the Case-Shiller data were positive. Of course, there were the usual caveats on the negative impact shadow inventory and distressed properties could still have (lest anyone get too confident). But these caveats are falling on deafer ears, and for good reason: distressed properties are also posting price increases.

RealtyTrac reports the average price of a foreclosure sold in the second quarter of 2012 rose 7 percent compared to the year-ago quarter. Foreclosure-related sales accounted for 23 percent of all home sales in the quarter, up 19 percent from last year. At the same time, the number of foreclosures and REOs coming to market declined 22 percent year over year.

In short, we have rising foreclosure prices, greater buyer interest in foreclosures, and fewer foreclosures hitting the market. These are all positives. If this trend continues, the shadow inventory will have proven to be a case of whistling past the graveyard: a little disconcerting, but harmless nonetheless.

We see no reason for the price trend to end. Existing homes sales are gaining momentum. The pending home sales index rose 2.4 percent in July compared to June. Year over year, the index is up 12.4 percent.

For all the price and sales gains recorded this year, homes still remain a value. Rental prices have kept pace with home price gains. In fact, price-to-rent ratios are where they were back in the late 1990s. Relatively speaking, a home is still a bargain.

But the bargain won't last forever, and maybe not even through 2013. The NAR projects existing home sales will rise 8-to-9 percent this year, followed by another 7-to-8 percent rise in 2013.

Today's mortgage-rate bargains also won't last forever. Yes, rates dropped close to recent lows this past week, but the drop occurred early in the week. As the week progressed, mortgage rates progressed higher after estimates of second-quarter 2012 gross domestic product were raised by the Commerce Department. In addition, the Federal Reserve's Beige Book showed the economy continued to expand in July and part of August.

When the economy kicks into gear so will loan demand, as will the price of loans – interest rates.

Courtesy of Jessica Regan.

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