NEW YORK -- Home prices in 20 U.S. cities rose for a fourth straight month in September, pointing to improvement in real estate that's helping the economy emerge from recession.
The S&P/Case-Shiller home-price index increased 0.27 percent from the prior month on a seasonally adjusted basis, after a 1.13 percent rise in August, the group said Tuesday.
The gauge fell 9.36 percent from September 2008, the smallest year-over-year decline since the end of 2007.
The San Diego market rose 0.9 percent from August, according to the index. Prices had risen 1.6 percent in August. San Diego values are now down only 5.7 percent for the year. Of the top 20 markets, five are outperforming San Diego.
Rising home sales, aided by government programs and a decline in mortgage rates this year, have helped stem the slump in property values that precipitated the worst recession since the 1930s.
Home buying and consumer spending may still be hampered by higher unemployment, which may prompt more foreclosures.
"The reduction of inventories we have seen has helped stabilize prices," said Michael Gregory, a senior economist at BMO Capital Markets in Toronto. "The reason you have to be a little more nervous or cautious is because some of the demand we're seeing for homes was from a push to get the transactions to close in anticipation of the tax credit expiring."
Nineteen of the 20 cities in the S&P/Case-Shiller index showed a smaller year-over-year decline in home prices than in August.
Compared with the prior month, nine of the 20 areas covered showed an increase while 10 had a decline.
The biggest month-to-month gains were in Detroit and Minneapolis, where prices increased 1.8 percent.
Existing home sales in October rose to the highest level in more than two years, National Association of Realtors data showed this week.
The median sales price decreased 7.1 percent from a year earlier, the smallest decline in more than a year.
Housing has been among the industries leading to stabilization in the U.S. economy.
To ensure the recovery in housing continues, President Barack Obama and Congress this month extended a tax credit of as much as $8,000 for first-time homebuyers until April 30, from Nov. 30. They also expanded it to include some current owners.
Concern about the looming expiration of the credit earlier this month weighed on builder sentiment and may have been the reason the Mortgage Bankers Association's purchase applications index fell to a 12-year low in the week ended Nov. 13.
While the erosion of house prices is starting to end, it will take "a considerable amount of time" for the housing market to recover fully, Federal Reserve Bank of Cleveland President Sandra Pianalto said in a speech Nov. 17.
"Though we have seen some signs that the worst may be over, the housing industry is not out of the woods yet," Pianalto said at a housing conference sponsored by the Ohio Housing Finance Agency and Ohio Capital Corporation for Housing. "Nor is the broader economy."
Two risks to stabilization in housing are rising unemployment and foreclosures. Foreclosures on prime mortgages and home loans insured by the Federal Housing Administration rose to 30-year highs in the third quarter, the Mortgage Bankers Association said Nov. 19.
Almost 23 percent of U.S. homeowners in the third quarter owed more on their mortgages than their properties are worth, according to First American Core Logic, a real-estate information company based in Santa Ana, Calif.
The unemployment rate rose to a 26-year high of 10.2 percent in October, according to the Labor Department.
More joblessness may lead to more mortgage defaults, bringing more foreclosed properties onto the market and pushing down prices. Higher unemployment will also limit demand.
D.R. Horton Inc. (NYSE: DHI), the second-largest U.S. homebuilder, on Nov. 20 reported a fourth-quarter loss that exceeded analysts' forecasts and said the housing outlook remains difficult.
"The thing that drives our business the most is job creation," Chief Executive Officer Donald Tomnitz said on an earnings call for analysts. "If we look at the macroeconomic environment, it's not good for us."
Karl Case, an economist professor at Wellesley College, and Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, created the home-price index based on research from the 1980s.