Inventories of REO properties are having less of an effect on home prices, according to the California-based real estate data provider Clear Capital. Nationally, home prices posted a 3.7 percent gain for the three months ending October 25 – a period Clear Capital calls a “rolling quarter.”

The company says the country’s REO saturation rate has declined to 28 percent-a 5.1 percent improvement since the burdensome bank-owned inventories of July. According to Clear Capital, muted REO influences are helping to boost property asking prices.

“Nationally, both the top and bottom performing markets are converging to modest quarterly changes, indicating a return to stable markets,” said Alex Villacorta, senior statistician for Clear Capital.

“The continued decline in REO saturation rates, as well as an increase in the proportion of cash buyers in both distressed and fair market sales are an encouraging sign of investor optimism coming into the traditionally slow months.”

Villacorta added, “If the home buyer tax credit is extended and possibly expanded, it could add even more momentum through the slow months to build up to a very strong spring in 2010 as more buyers are sensing that home prices truly have hit the bottom of the current cycle.”

Investor activity does appear to be on the rise. According to Clear Capital, this past year, the proportion of REO purchases made with cash grew 12.4 percent. Cash purchases typically signal an investor purchase, and the company says the magnitude of this increase indicates investor activity is contributing to recent home price gains and has the potential to carry us through the normally slower winter season. In particular, the company reports a noticeable increase in investor purchases in some of the hardest-hit markets of California and Florida.

The 3.7 percent “rolling quarter” gain in prices on the national stage coincided with a year-over-year decline of 8.4 percent. But Clear Capital says the annual drop was trimmed 1.5 percent compared to last month’s year-to-year comparison. It’s the second month in a row that the annual readings have produced only single digit losses.

Drilling down to the local market level, Clear Capital says quarterly price gains remained strong among the highest performing major markets, helped by the continued decline in the percentage of REO sales. Based on Clear Capital’s data, only three metros saw increased REO saturation rates – New Orleans, Louisiana; Louisville, Kentucky; and Cleveland, Ohio – but even those increases were slight, less than one-half percent each.