The appreciation in U.S. home prices offers little comfort for a housing market recovery as the decelerating rate of the gains continues to temper expectations. The Standard & Poor’s/Case-Shiller indices released earlier today showed the price of single-family homes in 20 major cities rose 4.2% in June from the year ago. Overall, prices increased during the month in 17 of the markets in the 20-city composite index, while two markets remained flat with the year ago and Las Vegas dipped 0.6% from May levels. The 10-city composite index rose 5% in June from a year ago, but Standard & Poor’s warned of “a possible deceleration in home price returns” because June figures fell month over month for the first time in 16 months. In May, the Case-Shiller 10-city composite rose 5.4% and the 20-city composite increased 4.6% from the year earlier. Nationally, home prices at the end of the second quarter are 3.6% higher than a year ago, according to S&P. But, some think the S&P/Case-Shiller indices are still painting an overly optimistic picture of the housing market. Last week, Radar Logic said more than half the metropolitan statistical areas tracked in its June RPX composite price index experienced monthly declines in June from May. The index, which measures home-pricing trends per-square-foot in 25 MSAa, was just 0.6% higher than May and flat with the year-ago June, marking one of the slowest rates of growth in a decade. Radar Logic believes the S&P/Case-Shiller figures overstate the current strength of the housing markets, and its composite index “better captures the current stagnation of the U.S. housing markets and is more consistent with the weakness apparent in other recent housing market indicators, such as new and existing single-family home sales.” More worrying to the market is the fact that in July homes sales fell 27.2% from the prior month to the lowest level since 1985. In an emailed note, Dean Baker, the co-director of the Center for Economic and Policy Research in Washington, said, “the effect of this plunge in sales on prices should be clear.” “With the demand side of the market having largely collapsed with the end of the tax credit, it is virtually certain that prices will resume their decline, completing the deflation of the bubble,” Baker said. Paul Dales, U.S. economist at Capital Economics, warns that investors moving in the housing market should not “be fooled into thinking” gains shown in the S&P/Case-Shiller indices mean “conditions in the housing market have stabilized…they have not.” Dales said the increases are only due to higher demand from the homebuyer tax credit and have yet to reflect the 34% decline seen in home sales once the credit expired. Write to Jason Philyaw.