Nov. 25--Slowly, but steadily, the local housing market is improving.

Housing prices in the Toledo area dropped 2.26 percent in the third quarter compared to a year ago, a figure that bettered the U.S. average of a 3.76 percent decline, the Federal Housing Finance Agency said in a report yesterday.

That marked the second straight quarter of improvement and placed the Toledo area 144th out of 297 housing markets in terms of the percentage change in house prices. It ranked 185th in the first quarter and 160th in the second quarter.

However, the news yesterday wasn't all good.

A mortgage data tracking firm in California released a report that showed 27 percent of all metro Toledo properties with a mortgage had loan amounts owed greater than the value of the property at the end of September. The national rate for so-called homes that are "underwater" was 23 percent.

The federal home price data, calculated using home sales information from Fannie Mae and Freddie Mac-acquired mortgages, showed not only an improved Toledo market, but a better Ohio market as a whole.

Ohio home prices declined 2.01 percent in the third quarter, ranking the state 18th, better than the 30th ranking it had the prior quarter when home prices dropped 3.87 percent.

"The fourth quarter last year and first quarter were just awful. When the dust settles, we're going to find the bottom of the real estate market -- not necessarily price, but production-wise -- is going to fall in our third quarter or fourth quarter," said Dave Browning, co-owner of Welles- Bowen Real Estate in the Toledo area.

Local and national home sales were helped in the third quarter because many first-time home buyers were enticed by the up to $8,000 in federal tax credits that were to expire by Nov. 30. The deadline, though, later was pushed back to April.

Housing prices in Lima, Ohio, sagged slightly, falling 0.21 percent in the third quarter and giving the area a ranking of 73rd, the federal housing report showed. That bumped Lima back from its 49th ranking in the prior quarter.

Sandusky, considered too small to be ranked, still was included in the federal report, with home prices rising 2.27 percent from a year earlier.

Michigan's housing market continues to struggle.

In Monroe, housing prices fell 6.55 percent from a year ago, ranking the city 221st. In the second quarter, it was 218th with a decline of 6.66 percent.

Overall, Michigan was the 36th-ranked state with home prices declining 4.21 percent from a year ago.

Meanwhile, the home loan report by First American CoreLogic, of Santa Ana, Calif., showed that the states with the worst problems with borrowers owing more than the home's value were Nevada, 65 percent; Arizona, 48 percent; Florida, 45 percent; Michigan, 37 percent, and California, 35 percent. Ohio had 20 percent, the report said.

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.

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