The S&P/Case-Shiller home price index for July posted another month of solid gains. The 20-city composite rose 12.4% year-over-year, in line with the consensus estimate for the month. The 10-city index rose 12.3% year-over-year in July.

The index tracks prices on a three-month rolling average. June represents the three-month average of April, May and June prices.

On a month-over-month basis, July prices were up 1.9% on the 10-city composite index and 1.8% on the 20-city composite. The increases were smaller than the month-over-month rise in June. All 20 cities in the index posted gains on a monthly basis, with Chicago showing the largest gain at 3.2%. On an annual basis, prices rose the most in San Francisco, up 24.8%. Index readings for both the 10-city and 20-city composites have returned to the levels of spring 2004.

The chairman of the S&P index committee said:

Following the increase in mortgage rates beginning last May, applications for mortgages have dropped, suggesting that rising interest rates are affecting housing. The Fed’s announcement last week that QE3 bond buying will continue for the time being may have only a limited, though favorable, impact on housing.

While home prices continue to rise, the pace of growth is slowing down and the rise in mortgage rates is certainly a factor. Because inventories have been low, house prices have risen as buyers returned to the market.

Lennar Corp. (NYSE: LEN) and KB Home (NYSE: KBH) both reported third-quarter results Tuesday morning that beat expectations on profit. KB Home, however, missed on revenues. Lennar’s shares are up more than 4% at $35.91 shortly after the opening bell, while KB Home’s shares are up about 1.5% at $17.32.

The iShares Dow Jones U.S. Home Construction (NYSEMKT: ITB) is up nearly 2%, at $22.65 in a 52-week range of $18.53 to $26.21.

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