Home prices in 20 U.S. cities rose more than forecast in June, from a year earlier, reflecting the influence of a government tax incentive and signaling that the market was stabilizing before sales plunged in July.
The S&P/Case-Shiller index of property values, released Tuesday, increased 4.2% from June 2009.
The median of estimates by economists Bloomberg News surveyed was for a 3.5% advance.
The index is a moving three-month average, which means the June data was influenced by April and May transactions that benefited from the federal incentive.
A pullback in demand since the credit expired, mounting foreclosures and an unemployment rate near a 26-year high may weigh on prices in coming months.
"The numbers were inflated by the homebuyer tax credit," said David Sloan, a senior economist at 4Cast Inc. in New York, who accurately predicted the gain. "The numbers will be going down in the coming months. We could see some significant declines."
Economists had foreseen index growth after May's 4.6% year-over-year rise, according to the median of 21 forecasts in the Bloomberg survey. Their estimates ranged from 2.5% to 4.2%. Year-over-year record keeping began in 2001.
The gauge rose 0.3% in June from the previous month, after adjusting for seasonal variations. Unadjusted prices climbed 1% from the month before. The year-over-year measure is a better sign of price trends, its compilers say.
The panel includes Karl Case and Robert Shiller, the economists who created the index.
Nationally, prices rose 3.6% in the second quarter from the year earlier and 2.3% from the previous three months.
Fifteen of the 20 cities in the S&P/Case-Shiller index showed year-over-year increases, led by the 14% gain in San Francisco and an 11% increase in San Diego.
Compared with the preceding month, 17 of the 20 metropolitan areas covered showed increases on an unadjusted basis, led by 2.5% gains in Chicago, Detroit and Minneapolis. Two cities were little changed; Las Vegas fell 0.6%.
"While the numbers are upbeat, other, more recent data on home sales and mortgages points to fewer gains ahead," said David Blitzer, the chairman of the index committee at S&P. Should the July plunge in sales continue, he said, "it will likely filter through to home prices in coming months."
Builders such as KB Home and Lennar Corp. reported falling sales after April 30, the deadline for homebuyers to sign home-purchase contracts that would qualify for the extended tax credit.
The deadline to close these purchases was later extended from June 30 to Sept. 30.
Purchases of new homes plunged in July to a record low, and the median price was the lowest since 2003, Commerce Department data showed in August. The National Association of Realtors reported a record, 27% drop in July sales of existing houses.
With the April 30 deadline for signing a contract eligible for a tax break now past, it is up to advances in the job market to support home sales.
Private companies added 71,000 jobs in July, fewer than economists had forecast, and initial jobless claims have averaged about 488,000 this month, a sign firings remain frequent.
Foreclosures may be a market obstacle for much of the year.
A record 269,962 U.S. homes were seized from delinquent owners in the second quarter as lenders set a pace to claim more than 1 million properties by the end of 2010, according to RealtyTrac Inc., an Irvine, Calif., data company.