S&P index shows home prices rose 3 percent in 2nd qtr, the first quarterly gain since 2006

Index shows home prices increase from 1Q to 2Q

NEW YORK — Home prices across most of the country have started to rise from the depths of the housing slump, a critical trend that will help stabilize the broader U.S. economy, according to new figures released Tuesday.

Nationally, prices in the second quarter posted their first quarterly increase in three years, according to the widely watched Standard & Poor’s/Case-Shiller’s U.S. National Home Price Index.

While home prices are still 30 percent below the mid-2006 peak, their new direction should bring relief to both lenders and homeowners. Falling property values have wiped out $4 trillion in homeowner equity, and thousands have walked away from homes that are worth far less than their mortgage balance. Lenders have written off billions of dollars in bad loans and to sell foreclosed homes at a fraction of their former cost.

“People are much more inclined to stay where they are and work something out,” if they have equity in their homes, said Sanjiv Das, chief executive of Citigroup’s mortgage unit.

And as consumers feel more confident in the value of their residences, they will feel safer about spending again. Consumer spending makes up about 70 percent of U.S. economic activity. In August, consumer confidence rose to the highest level since the recession began, the New York-based Conference Board said Tuesday.

Case-Shiller’s monthly index of 20 major cities also rose from May to June, with Dallas and Denver clocking their fourth-straight increase. Only Detroit and Las Vegas saw prices fall in June.

There are concerns, however, that the momentum behind home prices will stall at the end of November with the expiration of a federal tax credit for first-time homebuyers. These newbie buyers are snapping up one in every three homes sold.

First-time buyers get a credit of 10 percent of the sales price of a home, up to $8,000. The credit phases out for singles earning more than $75,000 and couples earning more than $150,000. The real estate industry is lobbying to have the credit extended.

“If the tax credit is making a significant impact, then housing will take a big hit when it expires,” said Pat Newport, an economist at IHS Global Insight.

Here’s a look at this month’s Case-Shiller report:

THE NEWS: The U.S. National Home Price Index rose 1.4 percent from the first quarter to 133, though was still down almost 15 percent from the second quarter of last year.

Home prices, on a seasonally adjusted basis, are at levels not seen since early 2003.

The monthly index of 20 major cities increased 0.7 percent to 142 from May to June, the second straight month the index didn’t decline. It was still 15.5 percent below June a year ago.

Every metro showed annual declines, with fifteen reporting double-digit drops.

THE REPORT: The Case-Shiller indexes measure home price increases and decreases relative to prices in January 2000. The base reading is 100; so a reading of 150 would mean that home prices increased 50 percent since the beginning of the index.

WHAT IT SHOWS: The 20-city index is a three-month moving average of repeat sales of a designated group of single-family homes in each city. By measuring the sales price of the same properties over time, the index prevents the data from being skewed by a change in the types of homes sold. Sales between related parties, such as family members, are excluded because they may not reflect true market values.

The Case-Shiller quarterly index is a composite of home price indexes for the nine U.S. census divisions.

WHAT IT DOESN’T SHOW: The indexes only measure price data in 20 major metropolitan areas in 15 states and the District of Columbia. So many areas of the country are not represented.

WHY IT MATTERS: Investors closely watch the Case-Shiller indexes to gauge the level and direction of home prices. The indexes include a broader mix of properties compared to the index created by the Federal Housing Finance Agency. That index excludes many high-end properties, as well as homes bought with riskier mortgages or all cash.

THE QUOTE: “For the second month in a row, we’re seeing some positive signs,” said David M. Blitzer, chairman of the S&P index committee, adding, “There are hints of an upward turn from a bottom.”

AP Real Estate Writer Alan Zibel in Washington contributed to this report.