Eighteen of the 20 cities in the index showed a year-over- year increase, led by a 21.7 percent jump in Phoenix. Detroit followed with a 10 percent gain. Chicago and New York posted declines. Year-over-year records began in 2001.
“It is clear that the housing recovery is gathering strength,” David Blitzer, chairman of the index committee, said in a statement. “Higher year-over-year price gains plus strong performances in the southwest and California, regions that suffered during the housing bust, confirm that housing is now contributing to the economy.”
Declining borrowing costs have underpinned demand for those able to get financing. The average rate on a 30-year, fixed mortgage was at 3.37 percent last week, close to the 3.31 percent from a month earlier that was the lowest in data going back to 1972, according to McLean, Virginia-based Freddie Mac.
“Record-low interest rates, attractive home prices, pent- up demand, a lower supply of existing homes for sale, improvement in the economy and employment, and greater optimism are all helping drive the housing recovery,” Ara Hovnanian, chief executive officer of homebuilder Hovnanian Enterprises Inc., said on a Dec. 13 earnings call. “This is occurring in spite of the restrictive mortgage lending environment and the number of underwater existing home buyers.”
Americans bought previously owned homes in November at the fastest pace in three years, figures from the National Association of Realtors showed Dec. 20 in Washington.
The job market remains an area that is holding the world’s largest economy back from a more pronounced rebound, explaining why Federal Reserve policy makers this month said they would keep the benchmark interest rate near zero as long as unemployment remains above 6.5 percent, and if the Fed projects inflation of no more than 2.5 percent in one or two years.
In addition, if Washington lawmakers fail to reach a deal on averting tax increases and spending cuts set to take effect in January, subsequent declines in business and consumer spending may also drive down economic progress.