U.S. home prices rose for the third straight month in August, a timid sign that a housing recovery is taking hold.

A sign indicating a reduced price is posted in front of a home for sale in East Palo Alto, Calif., in 2008. After tumbling for months, a closely watched index of U.S. housing prices inched upwards in August. (Paul Sakuma/Associated Press)

The Standard & Poor's/Case-Shiller home price index of 20 major cities released Tuesday rose one per cent from July to a seasonally adjusted reading of 144.5.

The index's base value of 100 represents housing values in January 2000.

While prices are down 11.4 per cent from August a year ago, the annual declines have slowed since February. Prices were down in all 20 cities monitored. But the results were actually slightly better than expectations for an 11.9 per cent decline.

“Broadly speaking, the rate of annual decline in home price values continues to improve,” said David M. Blitzer, chair of the index committee at Standard & Poor's.

In a release, Blitzer cautioned that the slight optimism in real estate should be viewed through the lens that a federal home buying tax credit for first-time buyers is set to expire in November. Once that ends, a decline in buyers could lead to a new tumble.

Prices are at levels not seen since August 2003 and have fallen 32.6 per cent from the peak in May 2006.