Home prices in major cities rose for a third consecutive month, but declining consumer confidence and a soon-to-expire tax credit for first-time home buyers could reverse the improving trend, economists said Tuesday.

Seasonally adjusted home prices increased in August, following increases in July and June, according to the Standard & Poor's/Case-Shiller 20-city index released Tuesday. Prices rose in 17 of the 20 metro areas, and 14 saw prices jump for the third month in a row.

Overall, prices are up 3% from May. But in most areas, prices are still well below where they were at their peaks in 2006 or 2007.

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Meanwhile, the Conference Board reported that consumer confidence fell sharply in October from September. The fourth decline in the past five months surprised many economists who had forecast a small increase in the closely watched index.

Nearly 50% of consumers told the Conference Board that jobs were hard to get, up from 47% in September.

Wells Fargo economist Mark Vitner calls the report "a wake-up call for those who thought the economy was out of the woods."

The cash-for-clunkers program and the up-to-$8,000 tax credit for first-time home buyers, which expires Nov. 30, boosted the economy last summer even more than anticipated, he says.

Patrick Newport, an economist at IHS Global Insight, says that without the tax credit, prices could fall an additional 5% and hit bottom in 2010.

"If the tax credit isn't extended, the sky's not going to fall, but prices will probably worsen," he says.

Congress is weighing proposals to extend the credit into 2010, as well as broaden it to buyers who already own homes.

Another concern for the housing industry: growing foreclosure rates in some metro areas because of rising unemployment and resets of adjustable-rate mortgages, says RealtyTrac in a report out Wednesday.

Among the top 50 metro areas with the highest foreclosure rates in the third quarter, the three biggest year-over-year increases were in Boise City-Nampa, Idaho, and Salt Lake City and Provo-Orem, Utah.