From: SmartMoney.com

Home Prices Are on the Move
Is the slump over?

Home prices in February posted their first year-over-year increase since December 2006, according to the latest S&P Case-Shiller home price index released Tuesday. Home prices in the index’s 20-city composite crept up a scant 0.6%, but prices fell month over month.

In a battered housing market where each positive decimal-point-worth of growth has observers heralding a turnaround, the first annual increase in three years is encouraging, analysts say.

But before a rebound is declared, there are a few factors to consider. The biggest: the federal home buyer tax credit, which expires April 30. The $8,000 credit has spurred home buying activity – and made the first few months of 2010 busier than usual. Once the credit deadline passes, there’s likely to be a drop-off in prices, says David Blitzer, managing director and chairman of the index committee at Standard & Poor’s. “We’ve probably stolen some sales from the next few months” as people hustle to take advantage of the free money from Uncle Sam, he says.

Construction data for February showed signs of life: Housing starts for February were up 0.2% year over year, and jumped 20% in March from the year prior. But they were still less than half the number of starts in 2007, according to the Census Bureau.

Of the 20 metropolitan areas, prices are now rising on a year-over-year basis in nine cities, most notably on the West Coast, including San Francisco (11.9%), San Diego (7.6%) and Los Angeles (5.3%), while Washington, D.C. posted a 5% rise. The largest declines were in Las Vegas (-14.6%), Tampa (-6.1%) and Seattle (-5.6%).
Here’s a look at six metros that had some of the best price increases and worst declines from last year.

San Francisco

Hands-down the strongest-performing market in February was San Francisco, which posted an 11.9% gain over the past 12 months. “California has been strong the last couple of months. There does seem to be something of a serious revival going on,” says Blitzer. One month would be a fluke, but these California metros have been seeing gains over the past several months, he says.

The recovery can in part be attributed to a lack of land. Coastal cities like San Francisco don’t have that much space to build hundreds of homes. From peak to trough, home values in San Francisco fell by some 40%, says Robert Van Order, a professor of real estate and finance at George Washington University’s School of Business. In the long run, you’d expect to see growing values there because it’s an inelastic market. “There’s not much room to build, so it has pretty good prospects,” he says.

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