Home prices are on the mend and the sector is showing signs of recovery though clouds still lurk on the horizon, says Yale economist Robert Shiller, architect of the Standard & Poor’s/Case-Shiller home price index.

Cooling Asian economies and an escalating European debt crisis could dampen recovery in the U.S. and keep the housing sector bouncing along a bottom, while fiscal concerns at home can lag on recovery as well.

The S&P/Case-Shiller composite home price index gained 0.5 percent in June 2012 from June 2011, the first annual increase since 2010, and increased 0.9 percent from May 2012.

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.

“We seem to have upward momentum … but there are a lot of clouds on the horizon too,” Shiller tells Yahoo.

“We have the European crisis, which is looking very iffy right now, we have Asia weakening, we have the fiscal cliff — there’s a lot of things,” Shiller said.

At the end of the year, a series of tax breaks are scheduled to expire at the same time preprogrammed cuts to government spending are set to kick in, a combination known as a fiscal cliff that could send the economy sliding into recession next year if left unchecked by Congress.

Neither President Barack Obama nor his GOP challenger Mitt Romney have proposed mentionable solutions to repair the housing sector, as the issue “does not seem to be front and center” in the campaign, Shiller adds.

Glenn Hubbard, one of Romney’s economic advisors, has proposed mass refinancing for struggling homeowners, a plan that Shiller supports.

“I think it is a good idea,” says Shiller.

“I think a lot of people are having trouble refinancing. It almost seems like an injustice.”

Is now the time to buy while borrowing costs are still low? Maybe, but there’s no rush to jump in the market.

“Housing market events take place over years,” Shiller says.

“The market usually doesn’t turn on a dime … you probably have years of time to get into this market.”

Meanwhile, market observers were pleased with the June housing data, pointing out that it was strong enough to indicate a more sustained recovery.

“Persistent news of rising house prices should start convincing prospective home sellers that it’s not just a buyers’ market,” says Jonathan Basile, an economist with Credit Suisse, according to The Associated Press.

“And when Americans become more comfortable with selling their home, they also become more comfortable with buying another one.”

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.