NEW YORK (CNNMoney.com) -- The value of U.S. homes grew on a monthly basis in May for the first time in nearly three years, according to 20-city index released Tuesday.

The month-over-month increase was 0.5%, according to the report from financial data company Standard & Poor's and economists Case-Shiller. It was the first increase in the monthly index since July 2006.

On an annual basis, home prices in the 20 cities fell 17.1%, but it was the second straight month that the year-over-year decline lessened.

"This could be an indication that home price declines are finally stabilizing," said David Blitzer, chairman of the index committee S&P, in a prepared statement.

While acknowledging that the report was good news, Mark Zandi, chief economist for Moody's Economy.com, downplayed the importance of a single month's statistics.

"I think it's a temporary respite," he said. "It reflects the recent decline in foreclosure sales, and prices will continue to fall over the next several months."

Robert Shiller, the Yale economist who co-founded the index and who's famous for warning that the housing boom was, in fact, a bubble, said the decrease in foreclosure sales does show up in the index statistics as a plus for home prices. That's one reason he did not want to sound too optimistic; foreclosures could take off again.

"And we could get more economic bad news, but it does look encouraging," he said.

He added that he thought that Washington's efforts have boosted the nation's spirits, an important factor for the housing market.

"The government has done a lot to support the housing market," he said. "Confidence has improved. People are talking about 'green shoots.' People are thinking it's time the recession came to an end. The stock market is up."

Cleveland gains: The improvement in the index was as broad as it was deep, with 13 metro areas showing gains, compared with eight in April. Two, New York and Tampa, Fla., showed no change.

The biggest winner was long-suffering Cleveland, where prices rose 4.1%. The city still falling the most was Las Vegas, where prices declined 2.6%.

The report added to the list of positive housing market indicators. These include rising new home sales, increased home building and increased pending sales.

Paul Bishop, the managing director of research for the National Association of Realtors, was glad to see the upturn but did not want to overemphasize the results of a single month, saying the economy is not out of the woods yet.

"Job losses could continue after the recession ends," he said. "That's where the economy intersects with consumers in the most tangible way. Until consumers have some level of confidence that the economy is improving, many will be reluctant to buy."

Washington's goal: Stabilizing the housing market has been a primary goal of Washington policy makers. Congress has tried to stimulate homebuying by creating a temporary tax credit of $8,000 for people who have not owned a home for at least three years.

The administration has also tried to tackle the foreclosure problem, creating a program to help mortgage borrowers avoid defaulting on their loan payments and losing their homes.

Zandi added that lenders are still figuring out the administration's foreclosure prevention plan, and have suspended the foreclosure process for many borrowers in default. That means fewer distressed properties, which tend to bring in lower prices, than usual.

One of the most positive things the government has done, according to Shiller, was to take control of the failing mortgage companies Fannie Mae and Freddie Mac.

These were government sponsored enterprises that guaranteed a flow of mortgage lending by buying or backing mortgages in the secondary market. Without government backing up these companies, mortgage lending would have dried up, which would have devastated home sales.

Lower prices: Prices have also fallen so far in so many places that it's drawing people back into the market.

In Las Vegas, prices are off about 53% from their peak, set in August 2006. Phoenix prices are down 54%.

Overall, the 20-city index is down more than 32% from its high.

Interest rates were very low in May, which also could have helped the housing market. The rate for a 30-year mortgage was well below 5% during the month, which encouraged buyers and drove up demand.

Zandi is hopeful that the market is stabilizing. "It feels like the cycle is winding down," he said. "I think it depends on how well the mortgage modification plan will work and I'm guessing it will work reasonably well."

One possible scenario, according to Shiller, is that home price declines end and then nothing happens for several years, the "L-shaped" recovery.

"Then, we can stop talking about home prices and get onto more interesting topics," he said.