U.S. home values were nearly 9.7% higher in the third quarter than a year earlier, according to First American Real Estate Solutions, Anaheim, Calif.,

Six of the 10 metropolitan areas with the biggest increases are in California. No. 1 was Orange County, where values jumped 23%.

Also in the top 10 were Boston, Seattle, Denver, and New York City. Nationally, home values are 21% higher than in 1990, the research firm said.

First American, a joint venture of First American Financial Corp., Santa Ana, Calif. and Experian, Orange, Calif., tracks the resale value of homes that have sold at least twice.

Research director Nima Nattagh attributed the growth, the fastest in this decade, to low unemployment, higher average income, and low interest rates. "These economic factors are leading to increased demand on the housing supply," Mr. Nattagh said.

However, he noted, "increases in home values today are compensating for equity losses incurred in the early 1990s. Depending on when they bought, some people are still suffering from the negative equity phenomenon."

Mr. Nattagh warned that the California growth rate, which he attributed to an increase in the biomedical and technology industry sectors, would not be sustainable, and might even hurt the market.

"The average income is not rising 23% in Orange County, and the growth will have a detrimental effect on affordability," Mr. Nattagh said. "The overall national growth will slow but still stay ahead of general inflation-probably around 5% to 6%."

But Bruce G. Norman, president of the California Mortgage Bankers Association, said that monthly payments on more expensive houses were not increasing drastically, because rates are falling.

"I'm not minimizing that increases in value affect affordability," said Mr. Norman, who is also president of First Mortgage Corp. in Diamond Bar. "Of course they do-but not as much as one might think.

"We were looking at about a 25% to 30% reduction in home values about four or five years ago, and this 23% increase hasn't quite made up for that yet."

According to the study, Hartford, Conn., is an area where the recent housing recovery has not made up for buyers of the early '90s, who are likely to be underwater by 17%.

"I don't think we've really had a boom, but lack of inflation and falling rates have kept things on an even keel," said William F. Weaver, president of Advest Bank and Trust Co. in Hartford.

"We had a sort of upside-down market, where houses would appraise down compared to the mortgages taken out on them," Mr. Weaver said.

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