Home prices in 20 U.S. cities rose in October from a year ago by the most in more than seven years, signaling the real-estate rebound will keep bolstering household wealth in 2014.
The S&P/Case-Shiller index of property prices in 20 cities climbed 13.6 percent from October 2012, the biggest 12-month gain since February 2006, after a 13.3 percent increase in the year ended in September, a report from the group showed today in New York. The median projection of 22 economists surveyed by Bloomberg called for a 13.5 percent advance.
A dwindling inventory of foreclosed properties has helped restrict the supply of homes for sale, pushing up prices even as higher mortgage rate cool demand. The real-estate market will probably get its next boost from gains in employment that are lifting consumer confidence in the economic expansion.
“There’s certainly room for home prices to continue rising in the coming year,” said Dana Saporta, an economist at Credit Suisse in New York, who projected a 13.7 percent year-over-year advance in prices. “As home prices continue to rise, more and more homeowners who are underwater on their mortgages will see their financial situations improving. Just getting out of that underwater position should be a big help to the economy.”
Stock-index futures held earlier gains after the report. The contract on the Standard & Poor’s 500 Index maturing in March climbed 0.2 percent to 1,838.5 at 9:19 a.m. in New York.
Estimates in the Bloomberg survey ranged from year-over- year gains of 11 percent to 14 percent. The S&P/Case-Shiller index is based on a three-month average, which means the October figure was influenced by transactions in September and August.
Home prices adjusted for seasonal variations rose 1 percent in October from the prior month, the same as in September. That matched the Bloomberg survey median.
The month-over-month price gains were led by Miami, which showed a 1.9 percent increase, followed by Atlanta and Detroit at 1.8 percent. Property values rose in all 20 metropolitan areas, with the smallest gain coming in at 0.3 percent in Denver.
Advances in home equity may be harder to come by as Federal Reserve policy makers begin to trim stimulus, causing mortgage rates to climb. Fed officials said on Dec. 18 they will trim monthly bond purchases intended to spur the expansion to $75 billion from $85 billion starting in January.