The Standard & Poor's/Case-Shiller home price index of 20 major cities rose 1.2 percent from June to a reading of 143.05. Though home prices are still 13.3 percent below July a year ago, the annual declines have slowed in all 20 cities for the sixth straight month.
The index is down about 33 percent from the peak in mid-2006. Home prices are now at levels not seen since the third quarter of 2003. And prices in Las Vegas, Detroit and Seattle are still falling.
Prices in Las Vegas are down more almost 55 percent from their peak. In August, almost 80 percent of home resales were either a foreclosure or a sale below the value of the mortgage, the National Association of Realtors said last week.
The Detroit housing market is being reeling from layoffs in the automotive industry. Seattle, by contrast, was one of the last areas to enter the downturn so prices there have yet to hit bottom.
"We do need to be cautious in coming months to assess whether the housing market will weather the expiration of the federal first-time buyer's tax credit in November, anticipated higher unemployment rates and a possible increase in foreclosures," said David M. Blitzer, committee chairman for the Case-Shiller index.
First-time homeowners can qualify for a tax credit worth 10 percent of the purchase price, up to $8,000, but it expires at the end of November. More than a dozen bills to extend the credit have been introduced in Congress, but it's unclear if lawmakers want to continue subsidizing the real estate market.
Still, there are clear positive trends: 13 metro area posted at least three straight months of price gains.
The Case-Shiller indexes measure home price increases and decreases relative to prices in January 2000. The base reading is 100; so a reading of 150 would mean that home prices increased 50 percent since the beginning of the index.
As for what shoppers think, The New York-based Conference Board, a private research group, said that its Consumer Confidence Index dipped to 53.1 in September, down from the revised 54.5 reading in August. Economists surveyed by Thomson Reuters had expected a reading of 57.
The index - fueled by signs that the economy might be stabilizing - had enjoyed a three-month climb since hitting a historic low in February of 25.3 but has been bumpy since June as rising unemployment has caught up with shoppers.
A reading above 90 means the economy is on solid footing. Above 100 signals strong growth.
Economists watch consumer sentiment because spending on goods and services for consumers, including housing and health care, accounts for about 70 percent of U.S. economic activity by federal measures.
The Conference Board's Present Situation Index, which measures consumers' current assessment of the economy, declined to 22.7 from 25.4. The Expectations Index, which measures consumers' outlook over the next six months, dipped to 73.3 from 73.8 last month.
"While not as pessimistic as earlier this year, consumers remain quite apprehensive about the short-term outlook and their incomes," said Lynn Franco, director of The Conference Board Consumer Research Center. "With the holiday season quickly approaching, this is not very encouraging news."
The big concern is the job market. Economists surveyed by Thomson Reuters project job losses slowed in September. On average, they predict 180,000 were lost this month, down from 216,000 in August. But Labor Department figures to be released this Friday are projected to show unemployment ticking up to 9.8 percent in September from 9.7 percent in August.
The weak job market, along with tight credit, has led shoppers to limit spending and focus on discounts when they do buy. Even those not worried about losing a job or finding a new one are embracing frugal behavior, buying only necessities and using more coupons.
Economists expect holiday sales to be at best flat from a year ago, the weakest holiday season since at least 1967 when the Commerce Department started collecting the data.
"Shoppers' habits have changed," said Frank Badillo, senior economist at consulting group TNS Retail Forward. "They remain focused on cutting back and trading down to discount retailers and to lower-priced brands. All of those behaviors are going to be enforced over the holidays."
Badillo projects sales for October through December won't change from last year, compared with the 4.5 percent decline last year from the year before.
The consumer confidence survey was sent to 5,000 households and had a cutoff date of Sept. 22.
The survey showed that consumers' appraisal of the job market was less favorable than the previous month. Those claiming jobs are "hard to get" increased to 47.0 percent from 44.3 percent, while those claiming jobs are "plentiful" decreased to 3.4 percent from 4.3 percent.
Stocks had been rising in the early going after the report on rising home prices.
Shortly after 10 a.m. Eastern time Tuesday, the Dow Jones industrials were down 29 at 9,760, after being up about 12 points prior to the consumer confidence data. The Standard & Poor's 500 index was down 2 at 1,060, and the Nasdaq composite index was down 7 at 2,122.