WASHINGTON – U.S. home prices rose in January at the fastest annual pace since June 2006, just before the housing bubble burst. The gain shows the housing recovery is strengthening ahead of the all-important spring buying season.
The Standard & Poor’s/Case-Shiller 20-city home price index climbed 8.1 per cent in the 12 months ending in January. That’s up from a 6.8 annual gain in December. Prices rose in all 20 cities. Eight markets posted double-digit increases, led by a 23.2 per cent gain in Phoenix. Prices rose 17.5 per cent in San Francisco and 15.3 per cent in Las Vegas, one of the nation’s hardest hit markets during the crisis.
Prices rose in 11 of 20 cities on a month-over-month basis. The monthly numbers are not seasonally adjusted and reflect the slower winter buying period.
The S&P/Case-Shiller index covers roughly half of U.S. homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The January figures are the latest available.
Home prices nationwide are still 29 per cent below their peak reached at the height of the housing bubble in August 2006. They are only back to where they were in August 2003.
Still, steady price increases should help make the housing recovery sustainable and add to economic growth. Higher home prices encourage more people to buy before prices rise further.
“Over time, persistently rising house prices also boost household wealth, make lenders more willing to lend because the asset they’re underwriting is appreciating, and ease pressure on local government budgets that get revenue from property taxes,” Jonathan Basile, director of economics at Credit Suisse, wrote in a research note.
Other recent reports have shown a strengthening recovery in housing, helped by near-record-low mortgage rates. Construction of single-family homes rose in February at the fastest pace in 4 1/2 years. Sales of previously owned homes rose last month to their fastest pace in more than three years.
More Americans are putting their houses on the market, suggesting they believe the housing market will continue to strengthen.
The number of available homes for sale rose 10 per cent last month, the first monthly gain since April. Even with the gain, the inventory of homes for sale was still 19 per cent below a year ago.
Investment in housing, including home construction, contributed to the nation’s economic growth last year for the first time since 2005; from 2006 through 2011, a drop in housing investment dragged economic growth down.