Home prices increased 0.6 percent according to the S&P/Case-Shiller 20-city index as nine of the 20 cities showed gains.

"Existing and new home sales, inventories and housing starts all show tremendous improvement," said David Blitzer, chairman of the index committee at S&P.

"The homebuyer tax credit, available until the end of April, is the likely cause for these encouraging numbers," he added, "and this may also flow through to some of our home price data in the next few months."

Home prices are 3 percent above May 2009 level which was the bottom, but still are 30 percent down from the May 2006 peak.

Home prices actually dropped 0.9 percent compared with January. The decline was small enough to put prices in positive territory compared with 12 months earlier, when home prices were sharply falling.

The best performing market in February was San Francisco as it posted an 11.9 percent increase over the past 12 months, San Diego home prices gained 7.6 percent while Los Angeles increased 5.3%.

The biggest loser continued to be Las Vega as it saw the largest annual drop at almost 15 percent over the past 12 months.

"These data point to a risk that home prices could decline further before experiencing any sustained gains," David Blitzer, chairman of the S&P index committee, said in a statement.