Home Price Gains Slow in July, August

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Updated from 8:50 a.m. ET with the following correction. The metro areas that saw declines in prices were not among the 40 largest.

NEW YORK (TheStreet) -- Home price appreciation slowed in July, according to Lender Processing Services, the latest sign that the housing recovery is losing steam.

The LPS Home Price Index rose just 0.6% in July from June, though prices are still up 8.7% year over year.

All of the five largest states and metropolitan areas saw price appreciation moderate. In California and Los Angeles, gains slowed to 0.5% and 0.3%, respectively, in July from 1.6% and 1.2% in June.

While all states managed to either record gains in home values or stay flat, some metros saw a slight dip in home prices, including Lancaster, York and Harrisburg in Pennsylvania, Ocean City, N.J., Winston, N.C., and Akron, Ohio.

The LPS Home Price Index is a repeat-sales analysis of home prices that represents the price of non-distressed sales by taking into account the discounts of foreclosures and short sales. It is based off closings in July.

It comes a day ahead of the widely followed S&P Case-Shiller Index, which is based off a three-month moving average and doesn't consider the impact of distressed sales.

Home prices are sharply off their bottom, and nationwide prices are just under 15% off the June 2006 peak, according to LPS.

Higher interest rates and the rapid appreciation in home values has, however, dented affordability for many borrowers and homebuilders and brokers report that buyers have shown hesitancy in recent transactions.

Most economists, however, hold the view that the rise in interest rates will not derail the housing recovery, so long as the economy continues to add more jobs. That's because there is considerable pent-up demand, a shortage of inventory and interest rates are still historically low.

Trulia chief economist Jed Kolko noted that it is still cheaper to buy than to rent nationally, though in some cities, especially in California, that trend could soon reverse.

A separate report from Zillow showed home prices continued to gain in August, up 0.4% from July and up 6.6% year over year.

Still, for the third month in a row, home values rose more slowly than the previous month.