(Home prices article updated with homebuilder stock movement and additional commentary.)

NEW YORK ( TheStreet) -- Stocks in the homebuilder sector moved higher Tuesday morning after a better-than-expected report from the S&P/Case-Shiller 20-city index of national home prices.

The index rose 4.4% in the second quarter, after a 2.8% drop in the first quarter. Economists had expected the index to rise just 3.1%, after rising 4.6% in May. A federal tax credit for homebuyers of up to $8,000 is largely credited with strengthening home sales this past spring as buyers rushed to push up their purchases before the credits expired April 30.

Homebuilder stocks fell at the opening bell but moved higher thirty minutes into trading. The SPDR S&P Homebuilders ( XHB) and iShares Dow Jones US Home Construction ( ITB), exchange-traded funds that tracks stocks in the homebuilder sector, rose 0.7% and 0.6%, respectively. Shares of NVR ( NVR) and Lennar ( LEN), among the XHB's top holdings, were 0.1% lower and 1.4% higher, respectively. Fellow builders D.R. Horton ( DHI), KB Home ( KBH), Ryland ( RYL) and Meritage Homes ( MTH) were all higher as well. Beazer Homes ( BZH) and Standard Pacific ( SPF) led the group in terms of share price gains, each rising 2.3%. Comstock Homebuilding ( CHCI) bucked the trend, falling 1.4%.

The index of national home prices rose 0.3% month-over-month on a seasonally adjusted basis, better than the 0.2% increase expected, but slower than the 0.5% rise in May.

Seventeen of the 20 cities measured in the index showed an increase in home prices, though a bulk of the uptick resulted from the pull-forward effect of the tax credits. The S&P/Case-Shiller 20-city index is a moving three-month average, so data for June was swayed by data from April and May.

Home prices were up 6% nationwide since the April 2009 bottom, but remain 28% lower than their peak in July 2006.

A lack of confidence among U.S. consumers will keep home prices from building back up to prerecession levels anytime soon, said David Blitzer, S&P's managing director and index committee chair, in an appearance on CNBC.

He added that the ratio of home prices to income has gotten back to longer-term trends, suggesting home prices may not go up soon but will likely not go a lot lower either.

"The worry starts when you remember that the Homebuyers' Tax Credit has expired, foreclosures are still at high levels, and July data on home sales and starts were very, very weak," Blitzer said.

The housing sector continues to be under tremendous pressure, and recent economic data indicated a long road ahead before the situation materially improves.

Data released last week showed new-home sales fell 12.4% in July to a record-low rate, while existing-home sales plummeted 27.2% last month. Both sets of data came in far worse than expected.

The home sales figures sparked a heated debate among readers of TheStreet. Join the discussion here.

>>Existing-Home Sales: Winners & Losers

The median sales price for new houses sold in July was $204,000, while the average selling price was $235,300. There were 210,000 new houses on the market at the end of July. It would take 9.1 months to work through that inventory at the current sales pace.

Sales of existing homes were at the lowest level since the total existing-home sales series launched in 1999, the report said. Single-family homes were at the lowest level since May of 1995, plummeting 27.1% in July to a seasonally adjusted annual rate of 3.4 million, from a pace of 4.6 million in June, and 25.6% below year-earlier levels. Single family homes account for the bulk of all existing home sales.

Record-low and near-record-low mortgage rates have failed to spark demand for new homes in recent months, but clearly had an effect on homeowners looking to lower their monthly payments through refinancing.

Mortgage applications rose 4.9% in the week ended Aug. 21, but refi applications accounted for 82.4% of all applications, up from 81.4% in the prior week, and the highest share observed since January 2009.

>> Mortgage Applications Rise on Refi

The still-struggling housing market saw demand fall further after the springtime expiration of federal tax credits for homebuyers. Most analysts agree the situation is likely to get worse before it gets better.

>>4 Top Homebuilder Stocks: Life After the Tax Credit

The housing market saw sales ramp up in March and April as consumers rushed to take advantage of tax credits that offered as much as $8,000 for first-time homebuyers and $6,500 for repeat buyers. Following the expiration of those credits on April 30, the market saw a dramatic decline in demand for the month of May that spilled over into June. Data for July showed a further drop in demand. Lawmakers later extended the deadline to close on a home purchase and still qualify for the tax credit to Sept. 30.

-- Written by Miriam Marcus Reimer in New York.

>To contact the writer of this article, click here: Miriam Reimer.

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