Home prices rise more than 8%
NEW YORK (CNNMoney) — Home prices continued their recovery, rising 8.1%, according to a closely-watched reading released Tuesday, although a separate report showed a slight slowdown in new-home sales.
The S&P Case-Shiller index, which tracks prices across the 20 largest markets in the nation, showed the rise in January was the biggest year-over-year gain in prices since June 2006.
“This marks the highest increase since the housing bubble burst,” said David Blitzer, chairman of the index committee at S&P Dow Jones Indices.
In a separate government report Tuesday, new homes sold at a 411,000 annual rate in February, down nearly 5% from the January sales pace but up 12% from year-earlier levels. The typical price of a new home sold in the month was $246,800, up about 3% from both the January and year-earlier median price.
The Case-Shiller report shows the recovery in home prices is widespread. All 20 markets posted a year-over-year gain in home values, and the pace of increase picked up in every market except Detroit.
Some of the markets hurt the most by the bursting of the housing bubble have enjoyed the biggest gains in the last year, led by a 23% rise in Phoenix. Prices were also up more than 10% in San Francisco, Las Vegas, Detroit, Atlanta, Minneapolis, Los Angeles and Miami, all markets hit hard by foreclosures due to the skid in prices after the bubble popped or economic problems associated with the recession.
New York posted the smallest rise, up only 0.7%, but that was a reversal from a slight decline in the December reading.
But even with the recent rise in prices, the overall index is down 28.4% from the 2006 peak in prices.
Home prices have been helped in recent months by a number of factors, including tight inventory of homes available for sale, near record-low mortgage rates and a drop in homes in foreclosure. All those factors have driven up home sales. A decline in unemployment is also helping the housing recovery.
The housing recovery itself is helping support overall economic growth, as builders scramble to hire workers to meet the renewed demand. The lift goes beyond the impact of increased construction on the economy, as the rise in home prices lifts household wealth.
Rising home prices also reduces the number of people owing more on their mortgages than their homes are worth. That, in turn, can help them to refinance those loans at a lower rate, freeing up money to spend on other goods and services.