NEW YORK ( TheStreet) -- Though Freddie Mac's ( FMCC.OB) report on Monday showing the largest quarterly home-price increase since 2005 seemed like good news prima facie, the headline number hid a troubling sign for the U.S. housing market. Home prices have only risen twice in the past three years: When the Obama administration unveiled a $275 billion homeowner-bailout program, and when its popular set of tax credits expired. The home-price bumps have essentially been taxpayer-funded bookends to a period of significant decline. Economists are split between a Goldilocks outlook based on affordability and a more realistic one suggesting that home prices may not be buoyed for awhile. >>>Rent vs. Buy Freddie Mac's price index for homes with traditional mortgages rose 3.1% during the three months ended in June. Though prices declined on an annual basis -- and declined even more when factoring in appraisals as well as sales -- the headline number represents the first quarterly price increase in more than a year. In the first quarter of 2009, when President Obama announced the "Making Home Affordable" plan, prices rose 1.1%. According to Freddie Mac, prices rose in all of the country's nine Census divisions. "We saw increases in home values in the second quarter that were very strong across all regions," says Freddie Mac Deputy Chief Economist Amy Crews Cutts. "There is no doubt that some of this was due in part to the now-expired homebuyer tax credits which boosted sales activity as well as to the usual seasonal bump we see each spring."
Cutts said the Freddie Mac economic team will be "watching carefully" the next two sales reports to "to see whether the July drop was the start of a new trend down or the result of a temporary pull-forward." Yun pointed out that historically low interest rates have created a housing affordability situation akin to a box of tinder awaiting an economic spark. Job growth can set off the fire. But if recent data on unemployment and underemployment are any indication, that may take awhile. After all, if the trends in home sales and prices have shown anything, it's that taxpayer funding can provide a temporary burst of energy, but can't sustain sales or price recovery. Between the initial "Making Home Affordable" surge and the most recent one, home prices declined nearly 7% and sales fell nearly 18%. --Written by Lauren Tara LaCapra in New York. >To contact the writer of this article, click here: Lauren Tara LaCapra. >To follow the writer on Twitter, go to http://twitter.com/laurenlacapra. >To submit a news tip, send an email to: email@example.com.