As with last month, the Minneapolis and San Francisco metro areas paced the increase, rising 3.2% and 2.8% respectively. Chicago, Los Angeles, Phoenix, and Washington D.C. all posted price gains of over 1% for August.

Despite the seeming strength coming back to the housing market, many analysts caution that the rise in prices may be temporary. Unemployment remains high, another wave of foreclosures may be in the offing, and an $8,000 first-time home buyer tax credit is scheduled to expire soon.

Some housing experts expect home prices to recover incrementally, following the pattern of the last few months. Getting back to the mid-2006 in home prices may still be a long way away.

The Case-Shiller index is widely considered one of the most accurate gauges of home prices because it compares recent home sales with previous prices for the same home. Last month the Index rose 1.6%.

“There is as yet no data to confirm that foreclosure-mediation programs anywhere have led to a substantial number of affordable and sustainable loan modification programs,” the report stated. The laws on the books have the potential to help borrowers, but they lack the same bank accountability as the voluntary federal program.

For example, in California, the state law says mortgager providers cannot begin foreclosure until 30 days after they have contacted the delinquent homeowner to explore options for the borrower to avoid foreclosure. The law went into effect in September 2008 and had the immediate effect of slowing down the foreclosure process. However, the number of foreclosures in California has now returned to its previous levels.

To improve the state programs, the report suggested several changes including requiring banks to disclose to homeowners the cost of foreclosure versus the cost of loan modification; imposing sanctions on lenders that do not negotiate in good faith; and requiring proof of who actually owns the loan. The report recommends that banks certify compliance with a mediator o court before being allowed to proceed on foreclosure.