February home prices fall, 1st annual rise in 3 years

The report suggests more price erosion is possible before prices start rising on a sustained basis, S&P said. The price improvement can be attributed to momentum from the federal homebuyer tax credits, which expire on April 30, and prices could be pressured further by foreclosure sales.

The S&P composite index of 20 metropolitan areas declined 0.1 percent in February on a seasonally adjusted basis, matching the forecast in a Reuters survey, after rising for eight straight months.

On an unadjusted basis, prices dropped 0.9 percent in February, worse than the estimated 0.3 percent decline and following a 0.4 percent downturn in January.

The home price indexes, for both 10-cities and 20-cities, showed the first annual upturn since December 2006, rising 1.4 percent and 0.6 percent respectively. The annual rise in the 20-city index, however, was half of the 1.2 percent increase forecast in a Reuters poll.

"These data point to a risk that home prices could decline further before experiencing any sustained gains," David M. Blitzer, Chairman of the Index Committee at S&P, said in a statement.

"While the year-over-year data continued to improve for 18 of the 20 Metropolitan Statistical Areas and the two Composites, this simply confirms that the pace of decline is less severe than a year ago," he said. "It is too early to say that the housing market is recovering."

(Reporting by Lynn Adler, Editing by Chizu Nomiyama)