The Miami Valley’s housing market has turned a corner, but a full recovery of home values is still years away, housing experts say.

A home is the single biggest investment most people make, so the value of their home is an important source of wealth. Experts believe an improving housing market can help create jobs and stimulate spending to benefit the rest of the economy.

There is evidence the market is improving. The number of area homes sold so far this year is the highest in four years, and home prices are rising. Also, foreclosure filings, while still high, have eased to levels below those seen last year.

But the national and local housing market fell into a deep hole when the housing market collapsed in 2008.

The average sale price over the first three quarters of this year is $123,000. That’s 18 percent below the peak average sale price of $150,750 in June 2006, which did not include sales of condominiums. They are factored into the average price now, according to the Dayton Area Board of Realtors.

“It’s going to be a slow recovery, but certainly the recovery’s there,” said Shaun Bond, director of University of Cincinnati’s Real Estate Center. But it has been “six years of continual downward house pricing movement. That’s just going to take a long time to unwind. I think it’s going to take us many, many years, if not a decade or more.”

The housing market in Montgomery County is at least stabilizing, county Auditor Karl Keith said. There were 1,185 valid homes sales in Montgomery County in the third quarter, the highest quarterly figure in three years, he said. But, 60 percent of the sales from the first half of 2012 sold for less than the current county assessed value.

“That shows the market, in terms of price, is still in a decline,” Keith said. “I don’t have a crystal ball, but I think this is a long term struggle for our community. I don’t see any kind of rapid rebound in the market. I don’t see this turning around quickly.”

Here’s a look at the factors impacting area home values today.

Loss of equity

The loss of equity has become a major local issue, said Mark Kottman, an agent with Real Living and treasurer of the Dayton Area Board of Realtors. “It’s one of the issues that’s inhibiting people from selling,” Kottman said.

About 24 percent of mortgages in the Dayton metro are underwater — meaning the amount owed on the home exceeds its appraised value, according to real estate firm CoreLogic.

Homeowners in this situation are stuck, waiting to sell their house until values come up. They could rent the house out. Or, if they must sell, they might have to bring cash to the table to pay off the mortgage if the sale price isn’t high enough.

They might also sell the house by short sale, an agreement with their morgage lender to accept a lower price, which affects the homeowner’s credit.

“That’s why you see as many short sales as you see. Some people have to sell, but they owe more than what their house is worth and they don’t have the money,” Kottman said.

Teri and Eric Barker will not try to sell their house of more than 18 years in Trotwood because they don’t think they will get a price high enough to cover the balance on the mortgage. Instead, they’re going to rent it and move with their daughter to a new house in Jefferson Twp. they bought in October.

The Barkers have watched their Trotwood neighborhood decline the past few years.

Teri said she has seen “a lot of foreclosures — just in the circle around my house, about seven homes that were either foreclosed or vacant.”

Location, condition

The new Jefferson Twp. house the Barkers move to this month is almost twice the size and is a well-maintained, one-story ranch sitting on five acres of land.

“It has a huge living room, a huge family room, really nice kitchen, a sunk-in living room,” Teri said. “We all have a bigger room now.”

They paid $180,000 for their house on Olt Road. The Montgomery County Auditor’s Office appraised it for $227,200 in 2011, down from $243,000 before that.

“That’s just the way the market is right now. We cannot balance the tax-assessed value with the market value right now because we have so many foreclosures,” said Cora Diggs, a real estate agent for Real Living Realty Services and president of Greater Dayton Realtist Association. She was the Barkers’ agent.

Before the crisis, real estate agents were able to set the listing price of a house for sale by adding about 30 percent to the tax appraised value, Diggs said.

“Now we look at the tax assessed value and sell it for less. That’s the change of the market,” she said.

The most important factors to the market value of any home are location and condition, said Kottman, the other agent with Real Living. Houses in older, urban settings built close together will sell for different prices than large, suburban lots with newer construction, for example.

So far this year, average prices in the Dayton area range from $46,400 in Dayton to $253,400 in Oakwood, according to the realtors group.

A house with updated, energy efficient appliances will add to a higher price than houses with outdated appliances.

The number of bedrooms and bathrooms, amount of land, age of the house and finished basement are also factors. Not only does the maintenance of your home contribute to its value, but the maintenance of other houses on the same street matters as well, Kottman said.

Comparable sales

Another key factor to home values are the prices recently paid for similar houses in the same neighborhood.

The rule of thumb real estate agents use is to find sales of similar size houses — by number of stories, bedrooms and bathrooms — in the past six months within half a mile. Recent sales prices of other similar homes give agents an idea of the price the market is willing to pay for your house, said Tammy Murphy, a real estate agent for Prudential One, Realtors.

“We of course want to be able to set some level of expectation with the seller as to what the value of the area is showing,” Murphy said.

If there aren’t any comparable sales, agents can go back further in the sales history or look at a wider area.

Sales of foreclosures, short sales and other distressed properties are not supposed to be used. In some neighborhoods there haven’t been any other sales or there have been more distressed sales.

“Which, if you’re looking at a $70,000 house, but all you’re getting is $15,000 sales, it’s going to make a big difference,” Murphy said.

Multiple foreclosures on the same block can impact the value of your house because your house is competing with those lower-priced homes.

But foreclosed homes also can be good deals for buyers.

In June, Cathy and Gregg Erbaugh bought with their daughter Jessica a foreclosed home in Beavercreek on Forest Drive for $65,000. Their realtor said houses in the neighborhood normally sell for an average $120,000 to $130,000.

Neighbors told them “they couldn’t get their house to sell because of this one,” Jessica said.

Jessica intends to buy the house from her parents while she studies to be a teacher and needed a house in a price range she could afford. Jessica wasn’t able to get a loan on her own as a first-time homebuyer because the repairs needed would have kept the loan from being approved.

Cathy Erbaugh said the property was an eyesore before she and her husband purchased it, as the house had no gutters, a truck sat on blocks in the front yard and a pond in the back was filled with black muck. It also had no plumbing or electric because of copper thefts. The whole family put in work to fix the house up.

“The deals are in the properties that need work,” Cathy Erbaugh said. The family’s total investment in the house has reached $80,000.

Next door neighbor Jamie Moorman watched the previous owner’s troubles before the Erbaughs moved in.

“Fortunately for us we weren’t in the market to sell. If we were, I can only imagine the loss we would have taken,” Moorman said. “We really took pride in our home and it (was) really difficult to look across the way to see the house.”

Property tax appraisals

The sales price of a home and the tax appraisal come from a different process. County auditor offices use a mass appraisal approach that does not consider appliances, or the inside condition of the house.

County auditor appraisers look at quality of construction, square footage and what it would cost to build the house new, and how much the cost would depreciate for how old the house is. They also look at sales of the most similar houses in the same neighborhood, said David Graham, Greene County auditor.

The county auditor considers comparable sales prices over a three-year period when updating appraised values, a longer time period than real estate agents or bank appraisers look at. More weight is put on the most recent sales.

The auditor’s office only does appraisals of homes for tax purposes and must value tens of thousands of parcels of properties, Graham said.

“Our values have always been behind,” Graham said.

Unless the homeowner gets a permit for a finished basement or an addition, the auditor doesn’t know to include that in the appraisal.

Every three years auditors conduct a triennial update, that uses a statistical approach to adjust appraised values based on market conditions and comparable sales prices. Every six years, auditors do a reappraisal where they view each property individually from the outside.

Montgomery and Greene counties finished in 2011 their three-year triennial update, the first time home tax appraisals were updated since the housing crisis began. This year, the two biggest counties in the area have started on their reappraisals, to be finished in the year 2014. The reappraisal currently underway will look at sales from 2011 to 2013.

If the value seems off, a complaint can be filed with the Board of Revisions.

In the case of the Erbaugh’s new purchase in Beavercreek, the house was not in foreclosure at the time Greene County auditors updated the tax appraisal. Graham said the property wouldn’t have been viewed by county appraisers since before 2008.

Based on the cost of construction and sales prices of surrounding houses, his office came up with an $112,000 appraised value, which is $47,000 higher than the $65,000 the Erbaughs paid for it.

Staff Writer Joanne Huist Smith contributed to this story.