U.S. home prices continued to increase in August as the Case Shiller 20-city Home Price Index increased 0.9 percent to its highest level since September 2010. The 20-city index is up 2.0 percent in the last year. At 145.87, the index was down 12.9 percent from where it was just before the 2008 presidential election. The index rose in 19 of the 20 cities, falling only in Seattle.

The 10-city index also rose 0.9 percent in August, increasing to 158.62, 1.3 percent ahead of August 2011 and the highest level since October 2010.

Home values play a significant role in the nation’s economy following the “wealth effect,” which holds that households spend more as perceived wealth increases. Increases in household net worth due to real estate (rather than stock) values have a greater impact on consumption, which is more than 70 percent of GDP.

The prices gains reported by Case-Shiller were led by a 2.3 percent gain in Detroit, a 1.8 percent increase in both Atlanta and Phoenix, 1.6 percent in Las Vegas, 1.3 percent in Los Angeles, 1.2 percent in Minneapolis, 1.1 percent in Washington, D.C., and 1.0 percent in both Cleveland and Miami. The year-over-year price improvement in Las Vegas was the first in that city—which had been a poster child for the housing boom—since December 2006.

Prices rose year-over-year in 17 of the 20 cities—compared with July when prices rose year-over-year in 16 cities—led by Phoenix, 18.8 percent, Minneapolis, 7.4 percent, Miami, 6.7 percent, Denver 5.5 percent and San Francisco, 5.3 percent.