WASHINGTON - U.S. house prices rose in the third quarter, ending a two-year downward trend, and the housing market was now slightly undervalued, an independent survey showed on Friday.

IHS Global Insight's quarterly housing valuation survey showed prices were up 0.2 percent from the second quarter, led by a 2.1 percent rise in home prices in California.

A separate Federal Housing Finance Agency showed house prices rose 0.9 percent year-over-year in the July-September period. That was the first advance since the second quarter of 2007 when the housing market slide started.

The surveys are the latest evidence that the housing market, the main trigger of the worst U.S. recession in 70 years, is stabilizing. Home sales have been trending higher, boosted by low mortgage rates and prices, as well as a popular tax credit for first-time buyers.

The IHS Global Insight survey, which covered 330 metropolitan areas, showed prices rose in 169 markets and fell in the remaining 161. For the first time since the survey started in 2005, there were no metropolitan areas where prices were deemed to be extremely overvalued.

For the nation as a whole, the housing market is now slightly undervalued, 8.6 percent when weighted by market value and 10.1 percent when weighted by housing units, IHS Global Insight said.

(Reporting by Lucia Mutikani; Editing by James Dalgleish)

California