Home prices in 20 U.S. cities rose at a slower pace in July, compared with a year earlier, reflecting a drop in sales after a federal tax credit expired.

The S&P/Case-Shiller index of property values increased 3.2% from July 2009, the smallest year-over-year gain since March, the index proprietor said Tuesday in New York. The gauge is a three-month average, which means the July data were still influenced by transactions in May and June that may have benefitted from the homebuyer incentive.

"The big happening in housing markets right now is the decline in buyer demand and stagnating supply," said Guy LeBas, the chief fixed-income strategist at Janney Montgomery Scott in Philadelphia.

The gauge fell 0.1% in July from June, after adjusting for seasonal variations, the first decline since March. Unadjusted prices rose 0.6% from June. The year-over-year measure is a better indicator of price trends, the index group has said.

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