Home prices in 20 U.S. cities rose in November from a year earlier by the most in more than six years, indicating the U.S. housing rebound is gaining ground.
The S&P/Case-Shiller index of property values increased 5.5% from November 2011, the biggest year-over-year gain since August 2006, a report showed today in New York. The median projection of 30 economists surveyed by Bloomberg called for a 5.6% advance.
Mortgage rates near a record low are propelling demand for real estate that’s outpacing the available supply, a sign prices will keep strengthening. Home-equity gains and an improving job market may help to put a floor under Americans’ confidence and spending, the biggest part of the economy, cushioning the hit from a higher payroll tax that began in January.
“With inventory of both new and existing homes still very low, prices will likely continue to rise,” Ian Shepherdson, chief economist at Pantheon Macroeconomics Advisors Inc. in White Plains, New York, said in a note to clients. “Each successive price increase adds more weight to the idea that the housing market is recovering, and nothing pulls people into the market faster than the thought that prices will rise further.
Stock-index futures held earlier losses after the report. The contract on the Standard & Poor’s 500 Index maturing in March dropped 0.2% to 1,493.5 at 9:12 a.m. in New York.
Bloomberg survey estimates ranged from 3.4% to 6.4%. The S&P/Case-Shiller index is based on a three-month average, which means the November data were influenced by transactions in October and September.
The October reading was revised to show a 4.2% year-to-year advance from a previously reported 4.3% gain.
Home prices adjusted for seasonal variations climbed 0.6% in November from the prior month, matching October’s increase. That compares with the Bloomberg survey median of a 0.7% rise.
The month-over-month gain was led by San Francisco, followed by Minneapolis.
Unadjusted prices in the 20 cities fell 0.1% in November from the previous month. Property values typically fall during this time of year.
The year-over-year gauge provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index. Year-over-year records began in 2001.
Nineteen of the 20 cities in the index showed a year-over-year gain, led by a 22.8% jump in Phoenix and a 12.7% increase in San Francisco.
New York was the only city to show decreases both month-to-month and year-to-year. Over the 12-month period, values in the city decreased 1.2%.
“Housing is clearly recovering,” David Blitzer, chairman of the S&P index committee, said in a statement. “These figures confirm that housing is contributing to economic growth.”
Combined sales of new and previously owned properties last year rose 9.9%, the biggest annual gain since 1998, data showed last week.
Purchases of previously-owned homes, which unexpectedly fell in December, were constrained by a lack of houses available for sale, the National Association of Realtors reported. Some 1.82 million existing homes were on the market last month, the fewest since January 2001, according to the group.
Lennar Corp., the largest U.S. homebuilder by market value, reported fiscal fourth-quarter earnings that beat analysts’ estimates as revenue jumped 42%. Stuart Miller, chief executive officer of the Miami-based company, said “a long-term demographic need for housing” is driving the housing recovery, which also is bolstering prices.
As “pent-up demand unwinds, homebuilders are gaining pricing power,” Miller said on a Jan. 15 earnings conference call. “After years of home prices falling, in 2012 the trend turned positive, initially stabilizing and then allowing for price increases across the country.”
D.R. Horton Inc., the largest U.S. homebuilder by volume, said today that fiscal first-quarter profit more than doubled as demand for new houses climbed. Orders jumped 39 percent to 5,259 homes. The company’s contract backlog, an indication of future sales, rose 80% to $1.76 billion.
“We experienced broad improvement in demand in most of our markets this quarter, and we significantly increased our investments in homes under construction, finished lots, land and land development to capture this increasing demand,” Chairman Donald R. Horton said in a statement.
Low borrowing costs are helping buyers who qualify for financing. The average rate on a 30-year fixed mortgage was at 3.42% last week, close to the 3.31% in November that was the lowest in data going back to 1972, according to McLean, Virginia-based Freddie Mac.
The fiscal pact passed by Congress on Jan. 1, while avoiding sweeping tax increases, let the payroll tax used to pay for Social Security benefits return to the 2010 level of 6.2% from 4.2%. That reduces the paycheck by about $83 a month for someone who earns $50,000.