WASHINGTON - Real estate values continued to improve over the past three months, with a particular upswing in commercial markets, the Federal Deposit Insurance Corp. said Monday.

"Improving conditions have begun to reduce the |overhangs' that have been plaguing real estate markets," the FDIC's latest survey of examiners and liquidators found.

The ratio of examiners and liquidators reporting excess supply of commercial properties fell to 75% in October, from 82% in July. Those seeing an excess of residential real estate fell to 43%, from 45%, during the period.

California Still a Weak Spot

But behind that good news was continued bad news about real estate in California, where values continued to deteriorate.

Every three months, the FDIC takes the pulse of real estate markets by surveying about 450 bank examiners and liquidators nationwide. The agency turns their observations into a national index that rates real estate overall. It also compiles indexes for residential and commercial markets. Finally, the FDIC breaks down the index into four regional figures.

West Improves the Most

The national index remained at 67 in October, the second most positive finding since the real estate survey was begun in 1991. But the commercial index jumped to 61, from 58 in July - its highest reading. The residential index fell to 72 in this survey from 73 in the summer survey.

Any value over 50 indicates that more examiners and liquidators thought conditions were improving than declining. The further the index is from 50, the more examiners agree about recent developments.

Interestingly, when the FDIC broke out its findings by region, the West scored the biggest increase, rising to 54 from 49. That's the best result in the West in a year.

Northeast Gains, Too

But the FDIC noted: "The weakness in this region continues to be concentrated in California." The index for California alone was 45, meaning more respondents saw conditions deteriorating than recovering.

The Northeast also gained ground, improving two points, to 68, "suggesting that the turn-around in real estate in that region is gaining momentum," according to the FDIC's report.

More than half the examiners and liquidators in the Northeast reported firmer housing prices, the FDIC said.

Real estate markets were the healthiest in the South, which rated 76, down from 77 in July. The Midwest was second-best, at 72, but it, too, was down from July's 74. In both the South and Midwest, nearly two-thirds of the survey's respondents noted increases in housing prices.

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