The S&P/Case-Shiller house price index showed housing prices climbing in May, but there are concerns that seasonal factors and the residual influence of the government's home buyers tax credit are boosting the numbers prior to a fall off in the second half of the year. Demand for homes has fallen sharply recently, and with inventories remain at elevated levels. That will put pressure on housing prices going forward.

Still, it was the second monthly increase in prices as the 10-city index rose 1.2% compared with April, and the 20-city index rose 1.3%. Adjusted for seasonal factors, both increased 0.5%. From a year earlier, the 10-city index rose 5.4%, and the 20-city reading climbed 4.6%. That was better than forecasts and should help the risk appetite momentum that has taken hold in equities and currency markets in the first half of this week.

Prior to April, the S&P index had declined for 6 straight months on a monthly basis. What the readings suggest then is that since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level.

This chart shows the index levels for the 10-city and 20-city composite indexes. As of May 2010, average home prices across the United States are back to the levels where they were in the autumn of 2003. Measured from June/July 2006 through May 2010, the peak-to-date figures for the 10-City Composite and 20-City Composite are -29.6% and -29.1%, respectively.