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) -- Home prices rose a faster-than-expected 1.3% in August, though the pace of monthly gains has slowed since April.

The S&P/Case-Shiller 20-City Composite Index in August rose 0.9% from July on a seasonally adjusted basis. Year over year, the index gained 12.8%, the biggest annual increase since February 2006.

Economists expected the 20-City Composite Index to rise 0.8% from the previous month or 0.7% on a seasonally adjusted basis, according to


. Year over year, prices were forecast to rise 12.4%.

Las Vegas led the gains, climbing 2.9% from the previous month, the highest increase since August 2004. Prices in the city were up 29.3%, the fastest pace since March 2005.

The S&P/Case-Shiller Index is based on a three-month moving average and therefore captures prices for June, July and August. It is also based on closed transactions, which means it reflects sales activity from a month or two earlier.

The data captures price action with a lag.

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However, the trend in the monthly index gains suggests that prices have moderated somewhat. The San Franciso housing market, for instance, which has seen home prices skyrocket over the past year, is showing signs of cooling. Home prices in the city rose 0.9% in August. In April, the monthly gain was as high as 4.9%.

"The monthly percentage changes for the 20-City composite show the peak rate of gain in home prices was last April. Since then home prices continued to rise, but at a slower pace each month.," said David Blitzer of S&P Dow Jones Indices. "This month 16 cities reported smaller gains in August compared to July. Recent increases in mortgage rates and fewer mortgage applications are two factors in these shifts."

Denver and Dallas set new highs, but all other cities remain below their peaks. Boston and Charlotte, however, are inching closer to their previous peaks, with only 8% to 9% left to go.

The 20-City Composite is about 20% below its peak.

-- Written by Shanthi Bharatwaj New York.

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