Home prices up, but can it last?

Don't take the latest snapshot of U.S. home prices too seriously.

The Standard & Poor's/Case-Shiller 20-city index released Tuesday ticked up in July from June. But the gain is merely temporary, analysts say. They see home values taking a dive in many major markets well into next year.

That's because the peak home-buying season is now ending after a dismal summer. The hardest-hit markets, already battered by foreclosures, are bracing for a bigger wave of homes sold at foreclosure or through short sales. A short sale is when a lender lets a homeowner sell for less than the mortgage is worth.

Add high unemployment and reluctant buyers, and the outlook in many areas is bleak. Nationally, home values are projected to fall 2.2 percent in the second half of the year, according to analysts surveyed by MacroMarkets LLC. And Moody's Analytics predicts the Case-Shiller index will drop 8 percent within a year.

Among the areas likely to endure big price drops, according to Veros, a real estate analysis company:

— Port St. Lucie, Fla., and Reno, Nev., where prices could fall 7 percent over the next year.

— Orlando and Daytona Beach, Fla., which face price drops of at least 6 percent.

— Las Vegas, which led all declines in the latest report, is also expected to post a 6 percent drop. Home values there have already tumbled 57 percent from their peak four years ago.

Las Vegas has been hit by foreclosures and the loss of tourism and construction jobs. More than 70 percent of homeowners there owe more on their mortgages than their homes are worth, according to real estate data firm CoreLogic. And the city's unemployment rate is nearly 15 percent, one of the highest for major U.S. markets.

The outlook in Orlando is also grim. More than half of borrowers owe more on their mortgages than their properties are worth. The unemployment rate there is nearly 12 percent.

This year, about 2 million, or 41 percent, of the 5 million homes sold this year will be distressed sales, predict analysts at John Burns Real Estate Consulting in Irvine, Calif. Distressed sales include foreclosures and short sales.

For next year, that figure is on pace to hit 2.4 million homes, or 45 percent of all sales. Distressed sales are projected to make up at least a quarter of the market for the next four years. In healthy housing markets, distressed sales typically make up only 6 to 7 percent of annual sales.

A much brighter outlook is forecast for some areas of the country, especially major cities that never experienced an outsized housing boom — and bust. Major cities in Texas, for example, have relatively healthy economies and low levels of foreclosures.

Dallas home prices fell only 11 percent from their peak in 2007 and bottomed out last year. They have since rebounded about 8 percent. Houston and Dallas are projected to rise about 3 to 4 percent over the next year.

Those markets "don't have the huge supply of homes that a lot of the coastal markets have," said Eric Fox, vice president of economic and statistical modeling at Veros.

Houston and Dallas both have jobless rates of under 9 percent, below the national average of 9.6 percent. And in both cities, fewer than 15 percent of borrowers owe more on their homes than their properties are worth.

Nationally, prices have risen nearly 7 percent from their April 2009 bottom. Yet they remain nearly 28 percent below their July 2006 peak.

Most experts predict about 5 million homes will be sold this year. That would be in line with last year and just above 2008, the worst sales performance since 1997.

The latest changes in the Case-Shiller national index represent a three-month moving average — for May, June and July. Sales in May and June were inflated by government tax credits that have since expired.

July was the worst month for home sales in 15 years. August wasn't much better. The record number of foreclosures, job concerns and weak demand from buyers have combined to weigh down prices.

"The market, at best, is weak, and starting to decline," said Michael Feder, chief executive of Radar Logic Inc., which tracks the housing market.

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Herron contributed to this report from New York.