Home Prices in 20 U.S. Cities Climb by Most Since May 2006
Residential real-estate prices increased in February by the most since May 2006, showing the U.S. housing market is strengthening.
The S&P/Case-Shiller index of property values in 20 cities rose 9.3 percent from February 2012, more than forecast, after advancing 8.1 percent in the year ended in January, the group said today in New York. The increase exceeded the 9 percent median forecast in a Bloomberg survey. Compared with the prior month, prices rose the most since October 2005.
Further price gains may help alleviate a lack of housing inventory by encouraging more homeowners to put their properties on the market. At the same time, mortgage rates close to all- time lows and an improving labor market are providing a boost for residential real estate, which is a source of strength for the expansion.
“The recent run up in prices probably has a lot to do with the lack of supply,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “The more attention that home price gains get, more and more people will realize it’s a good time to sell their home.”
Estimates for the year-over-year price change ranged from increases of 8.5 percent to 9.3 percent, according to the 27 economists surveyed. The Case-Shiller index is based on a three- month average, which means the February figure was influenced by transactions in January and December.
Stock-index futures were little changed after the figures, with the contract on the Standard & Poor’s 500 Index expiring in June falling 0.1 percent to 1,587.2 at 9:29 a.m. in New York.
Home prices adjusted for seasonal variations rose 1.2 percent in February from the prior month after climbing 1 percent in January. Las Vegas showed the biggest adjusted monthly increase, with prices climbing 2 percent. San Francisco, Phoenix and Los Angeles home prices advanced 1.8 percent.
Unadjusted prices climbed 0.3 last month from February as 11 of 20 cities showed increases.
The year-over-year gauge provides better indications of trends in prices, according to the S&P/Case-Shiller group. The panel includes Karl Case and Robert Shiller, the economists who created the index.
For a second straight month, all 20 cities in the index showed a year-over-year increase. Phoenix showed the biggest year-over-year increase, with prices jumping 23 percent in the 12 months to February. Home values in San Francisco advanced 18.9 percent, while in Las Vegas, they were up 17.6 percent.
“Home prices continue to show solid increases,” David Blitzer, chairman of the S&P index committee, said in a statement. “Housing continues to be one of the brighter spots in the economy.”
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Demand that’s rising while inventories remain tight has exerted upward pressure on home values. There were 1.93 million previously-owned properties on the market last month, the fewest of any March since 2000, according to data from the National Association of Realtors.
Price figures from the NAR showed the median value of an existing home rose 11.8 percent, the most since November 2005, to $184,300 last month from $164,800 in March 2012.
Other indicators corroborate the NAR data. Property values climbed 10.2 percent in the 12 months through February, the most in almost seven years, according to Irvine, California-based CoreLogic Inc. Prices advanced 7.1 percent in the year through February, the most since 2006, the Federal Housing Finance Agency said on April 23.
“Demand for homes has strengthened and the relative available housing supply has shrunk, which has created a favorable pricing environment,” Donald Tomnitz, president and chief executive officer of homebuilder D.R. Horton Inc., said during an April 26 earnings call. Fort Worth, Texas-based D.R. Horton is the largest U.S. homebuilder by volume. “Our first- time buyer demand remains very strong, and we continue to see improving demand from move-up buyers.”
More sales could propel prices even higher, inducing others to join the market to take advantage of cheap mortgage rates before borrowing costs rise. The average rate for a 30-year fixed mortgage was 3.40 percent in the week ended April 25, down from 3.41 percent, according to Freddie Mac. In November, the rate reached an all-time low of 3.31 percent. The average 15- year rate dropped to a record-low 2.61 percent.
Higher home prices have also boosted household wealth, which will help underpin consumer spending, in turn, spur economic growth. Figures from the Federal Reserve show that the value of Americans’ real estate worth has climbed each quarter since July 2011.
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