U.S. home values rose 1.3 percent in the third quarter of 2012, marking the fourth consecutive quarter of increases. The Zillow Home Value Index (ZHVI)[1] also rose on an annual basis, increasing 3.2 percent year-over-year to $153,800, according to Zillow's third quarter Real Estate Market Reports[2].

Looking ahead, the Zillow Home Value Forecast[3] shows U.S. home values will increase 1.7 percent over the next year, and that 183 of the 253 markets covered by the Forecast have hit a bottom. An additional 41 markets are expected to hit a bottom in the next year.

However, the pace of the recovery is uneven across markets. In the Phoenix metro area, for example, home values rose 5.9 percent quarter-over-quarter, and increased 20.4 percent year-over-year. But in the Atlanta metro, home values fell 2.2 percent quarter-over-quarter and 4.8 percent year-over-year.

Overall, more metro areas experienced home value declines in the third quarter, more than half (52 percent) showing declines in the third quarter, compared with one-third (34 percent) in the second quarter[4]. Zillow forecasts a saw-toothed bottom to the housing market, in which home values will log small rises and falls before returning to consistent monthly home value appreciation closer to the long-term historical average.

"We're likely seeing home values fall back into the negative range in some markets due to the close of the traditional home-buying season," said Zillow Chief Economist Dr. Stan Humphries. "While that doesn't mean the recovery has come off the rails – in fact, most markets have hit bottom – it does present a confusing environment for consumers. Looking forward, we expect to see home values bump along the bottom for some time, before increasing at a slow and steady pace."

Political Battleground States Experience Home Value Declines in Q3

On a state level, 17 of the 41 states covered by Zillow showed quarterly home values decreases. More than half of the nine electoral battleground states[5] – New Hampshire, North Carolina, Ohio, Virginia and Wisconsin – were among those showing quarterly declines.

"The positive news on a national level is dominating headlines, and perhaps that is why we haven't heard either presidential candidate talk in-depth about housing," Humphries said. "However, despite the national recovery, we are seeing significant polarization among markets, and more than half of battleground states still are experiencing home value declines. This demonstrates that for many pivotal voters who will decide the upcoming election, housing is still a key issue, and one that should be addressed by the candidates."