Home prices in 20 U.S. cities rose in December for a seventh consecutive month, indicating the industry at the heart of the worst recession since the 1930s is stabilizing.

The S&P/Case-Shiller home-price index increased 0.3% from the prior month on a seasonally adjusted basis, more than anticipated and matching the gain in November, figures from the group showed today in New York.

The gauge was down 3.1% from December 2008, the smallest decline since May 2007.

"It's reassuring that we're seeing stabilization and outright increases in home prices," said Michael Feroli, an economist at JPMorgan Chase & Co., who accurately forecast the adjusted month-over-month gain.

He said he expects prices to be "flat" in coming months.

Economists surveyed by Bloomberg News anticipated prices would drop 3.1% in the 12 months to December, based on the median estimate of 27 projections.

Estimates ranged from a decline of 5.3% to a gain of 3%.

They also forecast a 0.1% seasonally adjusted increase in December from a month earlier, the survey showed.

Compared with the prior month, 14 of the 20 areas covered showed an increase on a seasonally adjusted basis, while five had a decline.

The biggest month-to-month gain was in Los Angeles, where prices rose 1.4%.

A record 3 million U.S. homes will be repossessed by lenders this year as unemployment and depressed home values leave borrowers unable to make their house payment or sell, according to a RealtyTrac Inc. forecast last month.

Increased foreclosures and unemployment are obstacles to steady gains in housing prices. Rising foreclosures are adding to inventory and may discourage some builders from beginning construction.

Last year there were 2.82 million foreclosures, the most since RealtyTrac, of Irvine, Calif., began compiling data in 2005.

In an effort to bolster the housing market, President Obama in November extended a tax credit for first-time homebuyers and expanded the program through April 30 to include some current owners.

The end of Fed purchases of mortgage-backed securities, aimed at keeping borrowing costs low, is another challenge for the industry.

The program is scheduled to expire by March 31.

Some home builders are seeing gains ahead of the expiration of the homebuyer tax credit. D.R. Horton Inc., the second-largest U.S. home builder by revenue, this month reported its first quarterly profit since 2007. "We expect our September quarter will be the most challenging as a tax credit support for home sales will have expired," Donald J. Tomnitz, D.R. Horton's president and chief executive, said during a Feb. 2 conference call.

Karl Case, a former 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.

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