(Updated for change in stock prices)

NEW YORK ( TheStreet) -- The S&P/Case-Shiller Home Price Index reported more encouraging news about the home market on Tuesday, but few of the nation's homebuilders saw the market reward them for the encouraging home-price news.

The national home-price index showed improved performance in the third quarter 2009, and for the second consecutive quarter. The homebuilders, on the other hand, couldn't catch a break, with only three stocks in the sector showing stock price increases on Tuesday.

One of the reasons for the continued problems for stocks in the homebuilding sector may be the relative glacial pace of improvements. The residential home market is recovering, albeit at a very gradual pace and with some big markets still lagging, the indices returns through September showed.
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Movement in homebuilder stocks has been up and down for the past few weeks , as strong earnings from Toll Brothers ( TOL) drove up the market mid-month, followed last week by weak earnings from D.R. Horton ( DHI), sending the sector back down for more punishment.

The U.S. National Home Price Index recorded an 8.9% decline in the third quarter, a marked improvement over the drop of 14.9% in the second quarter and 19% drop in the first quarter 2009.

The 10-City and 20-City composite indexes recorded annual declines of 8.5% and 9.4% respectively, continuing a trend of general annual return improvement through each month of 2009 -- it was the fifth consecutive monthly increase for both indices in September.

Even better, these indices emerged from double digit declines for the first time in 21 months.

The dark side of the report was the fact that even with the generally improving outlook, the numbers through September -- lacking the typical summer increase in home sales -- led to fewer cities seeing improvements over August levels, and this held true on a seasonally-adjusted basis as well.

Nationally, the U.S. composite index rose by the same 3.1% in both the second and third quarters.

Most of the major homebuilder stocks were in negative territory at the market close on Tuesday, with the exceptions of Hovnanian Enterprises ( HOV), up 0.3%, and two small homebuilders: M/I Homes ( MHO) up 0.9%; and Standard Pacific ( SPF), a relatively minor player, up 4.5% to a closing stock price of $3.23.

Pulte Homes ( PHM) and KB Homes ( KBH)were down 2.7% and 2% at the close, respectively.

While 19 of the 20 metro areas in the 10-City and 20-city indices saw continued improvement, Cleveland continued to be a dog, down 1.6% for the month, the most of any major metro area. Las Vegas has the longest losing streak with 37 consecutive months of declining prices.

The biggest gains were made by Detroit and Minneapolis, both up 1.8% in September. However, the report noted that Detroit is only at 73% of its 2000 level. San Francisco and Chicago reported their sixth-consecutive month of gains.

-- Reported by Eric Rosenbaum in New York

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