The housing industry received mixed signals today about how home prices have been performing and where they’re headed. According to the S&P/Case-Shiller Home Price Indices, which was released today and covers all nine U.S. Census divisions as well as the country’s 20 largest metro statistical areas (MSAs), prices were down in the third quarter, dropping 1.2% on a seasonally adjusted basis compared to the second quarter. However, the Federal Housing Finance Agency’s (FHFA) House Price Index (HPI), which also was released today and covers the nine U.S. Census divisions, showed a 0.2% improvement in the third quarter.

The disparity stems from the differences in how the indices are constructed, says Patrick Newport, U.S. economist at IHS Global Insight. While FHFA’s data is gathered from sales prices of mortgages acquired by Fannie Mae and Freddie Mac, the Case-Shiller index gathers data from all sales, including those involving subprime loans, giving the index more exposure to distressed sales.

One thing both indices could agree on, however, was that prices were down year-over-year. S&P pegged the third quarter’s annual rate of decline at 3.9% nationally, while FHFA reported a 3.7% fall from the third quarter of 2010. However, FHFA also pointed out that over the same one-year period, prices of other goods and services gained 4.8%, meaning that after adjusting for inflation, home prices actually fell approximately 8.1% over the year, according to that index.

S&P reported that only two MSAs, Detroit and Washington, D.C., reported positive numbers on a yearly basis, gaining 3.7% and 1.0%, respectively. Both the 10- and 20-city composites declined from the previous year, dropping 3.3% and 3.6%, respectively.

On a monthly basis, S&P’s 10-city composite declined 0.4% on a seasonally adjusted basis in September, and the 20-city dropped 0.6%. While only five MSAs posted positive numbers in September compared to August (including Cleveland, Dallas, New York, Portland, Ore., and Washington, D.C.), 14 of the 20 MSAs reported improved rates of change compared to the previous month.

Three cities—Atlanta, Las Vegas, and Phoenix—posted new index lows in September, a finding David Blitzer, chairman of the Index Committee at S&P Indices, described as "a bit disturbing."

While the severe drops in prices seen between 2007 and 2009 are likely over, he wrote in a statement regarding the numbers, "any chance for a sustained recovery will probably need a stronger economy."

Where prices were faring worst was also a point of disagreement between the two indices. S&P named Atlanta as the most troubled region, with an annual price decline of 9.8% and a monthly drop of 4.1%. Its nearest contender for the worst position among MSAs on S&P’s list was Las Vegas, which reported annual and monthly declines of 7.3% and 1.8%, respectively.

FHFA’s worst performer was the Phoenix area, which saw a 10.6% price decline between the third quarter of 2010 and third quarter of this year, according to that index.

Looking ahead to where prices may be going, Newport was unhopeful. "The background numbers are discouraging," he wrote in a release today regarding the numbers, pointing to data from the Mortgage Bankers Association indicating that at the end of the third quarter, 12.6% of homeowners with mortgages (more than 6 million homeowners) were either delinquent on payments or in foreclosure; and CoreLogic data that shows about 22% of residential properties with mortgages were underwater by the third quarter’s end. "Add to this the current high unemployment and underemployment rates, and one gets a recipe for further price declines."

Claire Easley is a senior editor at Builder.

Learn more about markets featured in this article: Cleveland, OH, Dallas, TX, New York, NY, Washington, DC, Portland, OR, Phoenix, AZ, Las Vegas, NV, Atlanta, GA, Greenville, SC.