Home Prices Rose Better Than Expected 0.5% in MayThe housing sector produced a pleasant surprise Tuesday: Home prices in May, still aided by the now-lapsed home buyers tax credit, rose a seasonally-adjusted 0.5% in 20 cities, according to the S&P/Case-Shiller U.S. National Home Price survey. Home prices in the 20-city index also rose 4.6% in May on a year-over-year basis.

Economists surveyed by Bloomberg had expected home prices to rise a seasonally-adjusted 0.2% in May, and 3.9% on a year-over-year basis. Home prices rose a seasonally-adjusted 0.4% in April, and 3.8% on a year-over-year basis.

Meanwhile, the S&P/Case-Shiller 10-city index also rose a seasonally-adjusted 0.5% in May, and 5.4% on a year-over-year basis.

Don't Celebrate Just Yet

David M. Blitzer, chairman of the Index Committee at Standard & Poor's, said that although the May housing data was better than economists had expected, it was too soon to break out the party hats and balloons.

"While May's report on its own looks somewhat positive, a broader look at home price levels over the past year still does not indicate that the housing market is in any form of sustained recovery," Blitzer said in a statement. "Since reaching its recent trough in April 2009, the housing market has really only stabilized at this lower level. The two Composites [the 20-city and 10-city indexes] have improved between 5% and 6% since then, but this is no better than the improvement they had registered as of October 2009. The last seven months have basically been flat."

"We need to watch where the housing markets will go after these temporary stimuli [home buyer tax credit programs] go away," Blitzer added, noting that it's still entirely possible that the housing market "might bounce along the bottom for the foreseeable future."

The home buyers tax credit, which provided an $8,000 tax credit for first-time buyers and $6,500 for repeat buyers, ended April 30. Given the current austerity mood permeating Washington, it doesn't look there's enough political support on Capitol Hill to renew the credit.

Most Major Cities Show Year-Over-Year Gains

Year-over-year percentage price changes in major U.S. cities were as follows: New York, down 0.4%; Chicago, down 1.5%; Boston, up 4.8%: Washington, D.C., up 7.4%; Atlanta, up 1.7%; Tampa, down 1.5%; Miami, up 1.2%; Dallas, up 2.9%; Denver, up 3.6%; Los Angeles, up 9.7%; San Francisco, up 18.3%; and Seattle, down 1.4%.

Originally greeted by Wall Street with a shrug, S&P/Case-Shiller home price data rose to market-mover status in 2008 as it became clear that the U.S. housing boom of the past decade was, in fact, a bubble fueled considerably by mortgage market excesses, from borrower to lender. The bursting of that bubble triggered record home mortgage foreclosures and mortgage back securities defaults (toxic assets), which led to the financial crisis that the U.S. and world are still trying to end today.

Overall, May's home price report represents only a modest victory for the U.S. housing sector. The 4.6% year-over-year gain and the 0.5% rise in May are positive developments, but investors need to keep in mind that the home buyer tax credit likely boosted sales and prices.

If home prices retrench in June or July, that would be a sign that organic -- or natural -- demand in the economy was not strong enough to support prices, and that the May data, along with April's rise, was skewed higher by a unique event: the rush to take advantage of the expiring home buyers tax credit.

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