Harrisburg PA Real Estate Market Update brought to you by Jessica Regan, GMH Mortgage:

"It's d éjà vu all over again,” or so goes one of Yogi Berra's more famous malapropisms. There is a whiff of appropriateness to it, because home prices and foreclosures are reoccurring themes.

This week, the news on home prices was mixed, but encouraging. Zillow reported that home values were up 0.4 percent for the second quarter of 2011 compared to the first, but down 6.2 percent year-over-year, with the average home valued at $171,600.

The National Association of Realtors also reported a year-over-year decline. According to the NAR, the median sales price of existing homes fell 2.8 percent to $171,900 in the second quarter compared to the same year-ago quarter. The good news is that the NAR's data show prices trending modestly higher in recent months.

The question is, will the price trend continue? Foreclosures are the elephants in the room. RealtyTrac reported that foreclosures fell 35 percent, hitting a 44-month low, in July compared to the same year-ago period. In most markets that would be good news, but not necessarily in this one; the drop is attributed to banks still working through last year's servicing fiasco. Many market watchers are expecting a surge in foreclosures that could plague housing through 2012.

If there is a foreclosure surge, it will likely be regional. RealtyTrac also reported that 73 percent of foreclosure activity has been concentrated in a few states: California, Florida, Georgia, Michigan, Illinois, Nevada, Arizona, Ohio, and Wisconsin. The aggregated numbers might appear dire, but that doesn't mean that any one market is necessarily weakening.

Speaking of one market (actually, a number of smaller markets), overbuilt Florida is showing observable improvement. Existing home sales in the Sunshine State are up year-over-year. The median sales price has improved 17.3 percent, to $94,000, from the first quarter to the second. Florida has suffered home-price depreciation as much as any state, but lower prices spur demand, which helps stabilize prices. It's simple economics, and it's working.

The economics of mortgage rates are anything but simple. A few of our colleagues have been lamenting Standard & Poor's downgrade of U.S. Treasury debt, believing higher rates are on the horizon. We're not so sure. Mortgage rates are tightly tethered to 10-year Treasury-note yields. The current yield on these notes has dropped below 2.2 percent, lower than the yields in early 2009, and for the past 50 years. Investors obviously aren't concerned.

Much hoopla was made of the news that the Federal Reserve plans to hold short-term rates close to zero until 2013. But the Fed doesn't control the longer end of the market, which is influenced by the general level of economic uncertainty, credit worthiness of borrowers, time preference, and risk aversion. Sentiment and perceptions of these variables can change, and they can change on a dime, as the recent collapse of stock prices shows.

In short, we don't think mortgage rates are rising soon, but we'd be hesitant to play the rate game just to save a few extra basis points.

We've reworded Yogi Berra's quote into a question because of the volatility and hard sell-off in stocks. Could we possibly be setting ourselves up for a repeat of a decade ago? If you'll remember, many investors sold stocks in late 2000 and early 2001. A lot of that money was then funneled into real estate.

Admittedly, many people were subsequently burned by poor decisions – namely paying and borrowing too much. But as the sting of these losses subsides and stock losses accumulate, it's not outside the realm of possibility for money to cycle back into value-priced real estate. One of the overlooked benefits of real estate is that prices aren't continuously updated, so investors aren't whipsawed emotionally with real estate like they are with stocks.

This isn't to say that we expect a cascade of dollars to flow into real estate, but it's worth noting that investments compete with each. Given recent action in the stock market, the real estate market is looking quite a bit better in comparison.