Residential real estate prices increased in January by the most since June 2006, indicating the U.S. housing market strengthened at the start of the year.
The S&P/Case-Shiller index of property values in 20 cities climbed 8.1% in January from the same month in 2012 after rising 6.8% in the year ended in December, the group said today in New York. The increase exceeded the 7.9% median forecast by economists in a Bloomberg survey.
Improving home values will lure more buyers into the real estate market by inducing current owners to put their properties up for sale and prompting builders to begin work on new dwellings. Historically low lending rates and a stronger labor market have helped fueled the rebound in housing, which is a source of strength for the economy.
“The housing market keeps on recovering,” said Christophe Barraud, an economist at Market Securities-Kyte Group in Paris. He correctly projected the January gain and is the third-best forecaster of home prices in the past two years, according to data compiled by Bloomberg. “Interest rates are staying low, which means more first-time homebuyers.”
Estimates for the year-over-year price change ranged from increases of 6% to 8.9%, according to forecasts from the 30 economists surveyed. The Case-Shiller index is based on a three-month average, which means the January figure was influenced by transactions in December and November.
Stock-index futures held gains after the report, with the contract on the Standard & Poor’s 500 Index expiring in June rising 0.2% to 1,549.6 at 9:09 a.m. in New York.
Figures from the Commerce Department showed orders for durable goods climbed more than forecast in February, propelled by automobiles and a rebound in demand for commercial aircraft. The 5.7% gain was the biggest since September and followed a 3.8% drop in the prior month.
Home prices adjusted for seasonal variations rose 1% in January from the prior month after a 0.9% gain in December. Phoenix and San Francisco showed the biggest adjusted monthly increases, with prices climbing 1.9% in both metropolitan areas. Atlanta posted a 1.8% gain, while values advanced 1.7% in both Las Vegas and Tampa, Florida.
Unadjusted prices advanced 0.1% in January from the previous month as nine of 20 cities showed an increase.
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.