June Case-Shiller Index up 3.8% MOM

June's Case-Shiller Index rose 3.8% from May to June in the San Francisco MSA.

After three years of declines, home prices increased 2.9% in the three months ended June 30, according to the latest S&P/Case-Shiller report. That is the first quarter-over-quarter improvement in three years.

Prices in the national index are down 14.9% compared with the second quarter of 2008, the report said. But that is better than the record 19.1% decline that was set in the first three months of 2009.

"We're seeing some positive signs," says David M. Blitzer, Chairman of the Index Committee at Standard & Poor's.

Among cities, Cleveland reported the biggest rebound during the three months; prices improved by 4.2%. San Francisco prices rose 3.8% and Minneapolis 3.1%. Prices declined in only two of the 20 cities, Las Vegas, down 2%, and Detroit, down 0.8%.

Despite the upbeat report, Robert Shiller, one of the principle authors of the Case-Shiller index, expressed caution, pointing out that last year's turnaround quickly fizzled out.

In early 2008, prices were falling 3% a month. That improved to -0.5% a month in the spring, giving the impression that the market would turn around. But prices quickly started falling more steeply again. The same thing could happen again, especially with the economy still in a downspin.

"The really important things [affecting home prices] are unemployment and momentum," said Shiller, who is a Yale economist. "We have momentum, which is very important, but we also have high unemployment."

And, he added, "the government has not yet handled the foreclosure problem."

Shiller, too, is relatively optimistic despite being cautious. "I have found that momentum matters," he said, "and this is a sudden break in [downward] momentum. The [market] psychology seems to be changing."

SOURCES: S&P and CNN MONEY