The closely watched S&P/Case-Shiller home price index reported its first annual increase in more than three years today, posting a 1.4% improvement for its 10-city composite and a 0.6% rise for its 20-city composite in February.

The data offered another indication that the housing market may finally be stabilizing, although softness clearly remains. Despite the annual gains for the overall indices, 11 of 20 cities in the Case-Shiller index reported year-over-year declines in home prices.

“We are not completely out of the woods,” cautioned David M. Blitzer, chairman of S&P’s index committee, outlining the situation. “Existing and new-home sales, inventories, and housing starts all show tremendous improvement in their March statistics. The home buyer tax credit, available until the end of April, is the likely cause for these encouraging numbers, and this may also flow through to some of our home price data in the next few months. Amidst all the news, however, we should also pay heed to foreclosure activity, which has reached its highest level in at least the last five years. As these homes are put up for sales, we may see some further dampening in home prices.”

The S&P/Case-Shiller home price index incorporates home value data on all homes sold (including those with jumbo loans) in 20 major housing markets around the country. It then breaks them into two groups—a 10-city and a 20-city composite.

The 10-city composite index, which includes Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco, and Washington, slipped 0.6% in February compared to the previous month. The 20-city composite, which covers those same 10 cities plus Atlanta, Charlotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix; Portland, Ore.; Seattle, and Tampa, dipped 0.9% for the same time period.

Because of its focus on major metros, the Case-Shiller indices typically show more dramatic home price changes than the Federal Housing Finance Agency home price index, which is based on the purchase prices of homes with loans owned or guaranteed by government-sponsored enterprises (GSE) Freddie Mac and Fannie Mae in all 50 states.

Alison Rice is senior editor, online, at BUILDER magazine.

Learn more about markets featured in this article: San Francisco, CA, Las Vegas, NV, Atlanta, GA.