NEW YORK (CNNMoney.com) -- Home prices rose slightly in May compared with a month earlier, appearing to have stablized at the lower levels that followed the end of the residential real estate bubble, according to the S&P/Case-Shiller Home Price Index of 20 major housing markets released Tuesday.
Prices were up 1.3% from April, and 4.6% from 12 months earlier.
The price rise might have reflected one of the last gasps of the government's incentive program, which paid tax refunds of as much as $8,000 to homebuyers if they signed a sales contract before May 1.
"It does look like the market was boosted by the tax credit," said Robert Dye, senior economist for PNC Financial Services. "It seems to have pulled some of the demand forward."
Although the increase was welcome news for the beleaguered housing market, S&P spokesman David Blitzer downplayed the gain.
"While May's report on its own looks somewhat positive, a broader look at home price levels over the past year still do not indicate that the housing market is in any form of sustained recovery," he said. "Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level. The last seven months have basically been flat."
Home prices peaked back in July 2006 and fell for 33 straight months before bottoming out in April 2009. The peak-to-trough decline came to more than 32%.
The index went on a short upswing for five months, regaining 5.3% of its loss before turning tail again, declining 2.2% before a modest rebound in April.
Only one of the 20 metro areas, Las Vegas, reported a price decline for May, with a 0.5% loss. Minneapolis had the largest spike: prices jumped 2.8% and were up 11.6% over the prior 12 months.
San Francisco had the largest year-over-year gain, 18.3% higher than May 2009. San Diego, at 12.4%, and Los Angeles, at 9.7%, have also posted healthy year-over-year gains.
In a way, the index may understate its positive results. It counts all sales, including distressed properties. Those have become a major component of the market, with short sales and bank repossessions accounting for close to a third of all sales.
Repossessions sell, on average, for 27% less than conventional sales, according to a recent report from MIT economist Parag Pathak and two Harvard researchers, John Campbell and Stefano Giglio.
"It's not surprising that there is a discount due to foreclosure," said Pathak in a release. "But it is surprising that it's so large."
The repossession discount comes from a couple of factors. Borrowers who lose their homes to foreclosure may not have had the funds or the incentive to maintain their homes well. The homes often come onto the market in poor condition, lowering their values.
In addition, lenders often want to sell the homes very quickly to avoid all the expenses of home ownership - taxes, utilities, insurance and maintenance - so they're willing to sell at far below comparable homes.
Maureen Maitland, vice president for index services at S&P, said foreclosure and short sale data is included in the index because they represent such a big part of the market. "In some metro areas they're 50% to 60% of sales," she said.
They're expected to remain so for a long time. The run rate for bank repossessions so far this year indicates more than a million homes will be lost to foreclosure and put back on the market by the banks.
That will extend the overhang on inventory, which along with the end of the tax credit will probably keep prices down for at least the summer months, according to Maitland.
It may be autumn, if then, before improvement in the economy puts housing markets back on a firm footing, according to Dye.
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