While some economists have forecast home prices on the mainland could dip below 2009 lows next year, Hawaii's recovery might not be as shaky.

Home prices in the Standard & Poor's/Case-Shiller index released yesterday rose 0.4 percent to a seasonally adjusted reading of 145.356 in October from September. However, only seven of the 20 metro areas tracked showed gains. Some economists have forecast that more foreclosures and limited government intervention could result in double-dip price drops for the index, which fell 7.3 percent from last October. However, while Honolulu closely tracks with the index's May 2009 bottom and its April 2006 peak, it's not likely to be the nation's “;last bad economy”; this cycle, said Paul Brewbaker, principle of TZ Economics.

“;We're climbing out of a ditch. The rest of the county is climbing out of the Grand Canyon,”; Brewbaker said.

During the last real estate cycle, Honolulu, which is not among the 20 cities tracked by Case-Shiller, lagged the index's bottom by some four years, he said.

“;It's a huge leap for most people, but we now appear to be living in real time,”; Brewbaker said. “;And, when it comes to the nation, I'm pretty sure that Oahu may be leading not following—just by a smidgen.”;

Case-Shiller reported wide variations around the country. Denver, Minneapolis, San Francisco and Washington, D.C., have seen six months of price gains, but in Chicago and Tampa, Fla., prices dropped from September and Las Vegas remained the one market that “;has not seen a glimmer of hope.”;

Prices have increased in 18 cities and are up about 3.5 percent over its May bottom but are tracking almost 30 percent below the peak.

“;All in all this report should be described as flat,”; said David M. Blitzer, chairman of the index committee at Standard & Poor's.

The turnaround in home prices seen in the spring and summer has faded, Blitzer said.

“;Coming after a series of solid gains, these data are likely to spark worries that home prices are about to take a second dip,”; he said, adding that housing starts remain weak and fears exist that the market will be hurt by a wave of foreclosures and/or the expiration of government housing programs in the first half of 2010.

However, before jumping to conclusions, Blitzer said, it is important to realize that the Federal Reserve policy is stable and consistent and that existing home sales have begun to work off inventory.

“;I'm reasonably optimistic about 2010,”; Brewbaker said. “;We have no housing production, no inventory glut and relatively low prices, so that's not the kind of situation that's keeping me up at night worrying about the next leg down for home prices. Oahu is a much better place than the rest of the country.”;

However, others, such as Stephany Sofos, a Honolulu-based real estate analyst and appraiser, disagree.

“;Hawaii has yet to see the real brunt of foreclosures,”; said Sofos, who got more than 10 requests one day last week to process pre-foreclosure appraisals. “;I'm on a rotation, so that means there could be hundreds coming.”;

Nationally, the foreclosure outlook is not good, said Patrick Newport, IHS Global Insight economist.

“;One in four mortgages are underwater, and that will likely cause foreclosure rates to rise,”; Newport said.

The proportion of vacant homes on the market inched up 0.1 percentage point in the third quarter to 2.6 percent, not far below the record 2.9 percent high reached in the fourth quarter of 2008, he said.

“;Despite the recent positive reports on housing prices, we believe that prices have further to fall—about another 5 to 10 percent,”; Newport said. Sofos said she expects Hawaii to experience similar drops as a result of the state's budget shortfall, the decline in tourism and the fallout of subprime loans.

Tax increases will not be enough to balance the state budget, so staff and programs will be cut, she said.

“;How are Mr. and Mrs. Hawaii going to pay their mortgages if they've lost hours or jobs?”; she said.