Home prices in 20 U.S. cities rose in the 12 months to December by the most in more than six years, a sign the housing-market recovery is strengthening.
The S&P/Case-Shiller index of property values increased 6.8 percent from December 2011, the biggest year-to-year gain since July 2006, after advancing 5.4% in November, a report showed today in New York. The median projection of 30 economists surveyed by Bloomberg called for a 6.6% advance. Nineteen of 20 cities showed gains.
Near record-low borrowing costs and gains in employment are fueling demand and boosting property values as the number of houses on the market drops and foreclosures ease. The improvement is shoring up household net worth and confidence, which may underpin consumer spending even as an increase in the payroll tax reduces take-home pay.
“The key here is it’s not as if we’re getting all the juice from one area, it’s broadly based across the country,” said Brian Jones, a senior U.S. economist at Societe Generale in New York, who correctly projected the year-over-year increase. “Rates are low, prices are attractive, so affordability is high, and the labor market is gradually healing as well. If you were in the market to buy a home, right now it’s a good time.
Another report showed residential property values climbed 0.6% in December from the prior month, according to data from the Federal Housing Finance Agency. They were up 5.5% in the fourth quarter from the same time a year earlier.
Stock-index futures held earlier gains after the reports. The contract on the Standard & Poor’s 500 Index maturing in March climbed 0.5% to 1,494.7 at 9:19 a.m. in New York as investors awaited Congressional testimony from Federal Reserve Chairman Ben S. Bernanke and figures on sales of new houses.
Bloomberg survey estimates ranged from increases of 6% to 7.6%. The S&P/Case-Shiller index is based on a three-month average, which means the December data were influenced by transactions in November and October.
The November reading was revised from a previously reported 5.5% gain.
Today’s report also included quarterly national figures. Prices covering all of the U.S. increased 7.3% in the fourth quarter from the same period in 2011, the most since the second quarter of 2006 and compared with a 3.6% gain in the year ended September. They fell 0.3% from the previous three months before seasonal adjustment. The gauge climbed 2% after taking those changes into account.