Home prices are stabilizing after steep declines last year, although prices are still down about 17 percent compared to last year, according to new home prices index report released on Tuesday which gives further support to the belief that the housing market is reaching a bottom.

While home prices in the U.S. are still falling, the annual rate of decline improved for the fourth consecutive month in 2009, according to new figures in the latest version of the Standard & Poor’s/Case Shiller indices.

“The pace of descent in home price values appears to be slowing” said David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s.

The indices, which measure home prices in 10-City and 20-City composites, reported that prices in May fell 16.8 percent and 17.1 percent respectively, compared to the same month last year.

The values are an improvement over April’s data, which showed prices fell 18.0 percent and 18.1 percent respectively.

The four consecutive months of improvement for the indices came after 16 consecutive months of decline from October 2007 to January 2009, according to a statement released today by Standard & Poor’s.

Blitzer said the indices reported positive returns for the first time since the summer of 2006.

“To put it in perspective, these are the first time we have seen broad increases in home prices in 34 months. This could be an indication that home price declines are finally stabilizing,” Blitzer said.

Blitzer noted however that despite signs of improvement on a year-over-year basis, home prices were still down about 17 percent on average across all metro areas.

“So we likely do have a way to go before we see sustained home price appreciation,” he said.