Single-family home prices rose more than expected in May, reflecting robust spring sales spurred by homebuyer tax credits, Standard & Poor's/Case Shiller home price indexes showed on Tuesday.
May is a strong seasonal period for home sales, S&P said, and buyers who rushed into the market to sign contracts by the April 30 deadline for up to $8,000 in tax credits have until September 30 to close loans.
Home prices have essentially moved sideways over the past seven months, however, and are likely to bounce around the bottom for the foreseeable future, S&P said.
There is still a huge amount of supply on the market but sales appear to have improved enough to stabilize prices, said Christopher Low, chief economist at FTN Financial. It will be a long time before they recover back to where they were before.
The 20-city composite price index rose 0.5 percent on a seasonally adjusted basis in May after an upwardly revised 0.6 percent gain in April, topping the 0.2 percent rise forecast in a Reuters poll.
Prices on an unadjusted basis jumped 1.3 percent in May, after a 0.9 percent April gain and declines in the six prior months. The index increased 4.6 percent in May from a year earlier, S&P said.
While May's report on its own looks somewhat positive, a broader look at home price levels over the past year still does not indicate that the housing market is in any form of sustained recovery, David M. Blitzer, chairman of the Index Committee at Standard & Poor's, said in a statement.
With the recent upturn, prices still are 29.1 percent lower than the peak four years ago. A record inventory of foreclosed properties is widely seen preventing much of a price upturn in the near term.
The payback from the federal tax incentives went beyond most expectations and some reports have started to show some stabilization from historic lows.
Sales of new homes in June surged 23.6 percent, but remained at the second-lowest level since the Commerce Department started keeping records in 1963. High unemployment and wage cuts are keeping many potential buyers at bay.
The government is expected to report on Friday that gross domestic product growth slowed to a 2.5 percent annual rate in the second quarter from a 2.7 percent pace in the first quarter.
(Additional reporting by Burton Frierson; Editing by James Dalgleish)