UPDATE: Home Prices Rise In January, Regulator Says

A regulator says U.S. home prices rose in January, a favorable sign in a housing crisis that has driven down asset values sharply.

Prices climbed 1.7% on a seasonally adjusted basis from December to January, according to the Federal Housing Finance Agency on Tuesday.

But analyst Abiel Reinhart of JPMorgan Chase Bank expressed caution over the increase.

"Part of the reason for the unexpected rise in January prices was that a disproportionate share of sales during the month occurred in stronger housing markets," said Reinhart. "With inventories of existing homes still extremely elevated, we expect that the FHFA price index will likely show renewed declines in coming months."

December's previously reported 0.1% increase was revised to a 0.2% decline.

For the 12 months ending in January, U.S. prices fell 6.3%. The index is 9.6% below its April 2007 peak.

The small increase in January suggests prices might stop their long descent and push consumers from the sidelines into the purchase of a home.

The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae (FNM) or Freddie Mac (FRE).

-By Jeff Bater, Dow Jones Newswires; 202-862-9249; [e-mail]