Average home prices rose 2.2 percent in May from April, a sign that the housing market is recovering, according to the S&P/Case-Shiller index.

The key index of property values in the country’s biggest 20 cities decreased 0.7 percent compared to May 2011, the smallest 12-month decline since September 2010.

“With May’s data, we saw a continuing trend of rising home prices for the spring,” said David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices, which released the data today.

“We have observed two consecutive months of increasing home prices and overall improvements in monthly and annual returns; however, we need to remember that spring and early summer are seasonally strong buying months so this trend must continue throughout the summer and into the fall.”

All 20 cities in the index posted gains in May from the previous month. New York residential real estate prices edged up 1.4 percent in May from April, in contrast to 0.2 percent up in April from March. Phoenix, one of the hardest hit cities in the housing downturn, posted the best annual increase, with a leap of 11.5 percent compared to May 2011. Atlanta was the only city with a double-digit negative annual rate of return, at 14.5 percent.

“This is great news that certainly bucks the trend of other data that points to an economy that’s slowing,” senior US economist at Nomura Securities International Inc. Ellen Zentner told Bloomberg. “It’ll be a salve for a lot of US households if we continue to see price gains in housing.”

The May data shows that average home prices in the US were back to pre-crisis spring 2003 levels. Residential prices, however, are still 33 percent lower than their peak from the summer of 2006.

“June data for existing home sales, new home sales, housing starts and mortgage default rates were a bit mixed, but all are better than their year-ago levels,” Blitzer said. “The housing market seems to be stabilizing, but we are definitely in a wait-and-see mode for the next few months.”

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