Home prices inched up during the second quarter in the Federal Housing Finance Agency's house price index, the first increase in three years. The agency said its second quarter HPI – calculated using information from mortgages acquired by Fannie Mae and Freddie Mac –  rose 0.9% on a seasonally adjusted basis from the prior quarter, yet fell 1.6% from the year ago. Still, prices of other goods and services in the second quarter were 3% higher than the year earlier. This puts the second quarter inflation-adjusted home price about 4.4% higher than last year, according to the FHFA. The Phoenix metropolitan area experienced the largest decline in home prices during the second quarter with a 5.5% drop from a year earlier. The Oakland area saw the largest increase with a 9.9% gain, the FHFA said. The agency’s all-transactions index for the quarter fell 0.5% from the first quarter and dropped 4.9% from the year earlier. "The news on the housing market has gone from bad to dire," said Paul Dales, economist with Toronto-based Capital Economics. "New home sales are getting to the stage where the distortions caused by the tax credit are fading, and as the smoke clears it is becoming blindingly obvious that underlying conditions are very weak." As HousingWire reported earlier today, new homes sales reached all-time lows in July. Dales expects the US economy to expand at no more than 2% annually "for a number of years" because of the double-dip in both housing activity and home prices, as well as sagging data from other economic indicators. The chart below shows quarterly home sales for the three months ended July 31 plummeted 34% to a level not seen since March 1993, according to Dales. Write to Jason Philyaw.