Home prices cap year with biggest rise since 2006

Tue Feb 26, 2013 1:23pm EST
 
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By Steven C. Johnson

NEW YORK (Reuters) - Home prices closed out 2012 with the biggest annual gain in more than six years while sales of new homes spiked in January, the latest sign that the long-suffering housing market was on the mend, data showed on Tuesday.

American consumers, meanwhile, grew more optimistic in February even as payroll taxes rose and about $85 billion worth of government spending cuts were due to take effect on March 1.

"The numbers are all pretty strong. It's a significant rise in confidence and a strong rise in new homes sales -- there is not really much to argue in those numbers," said David Sloan, an economist at 4Cast Ltd in New York.

The S&P/Case Shiller composite index of 20 metropolitan areas showed home prices jumped 6.8 percent year-over-year in December, the biggest gain since July, 2006, just before the bottom began to fall out of the U.S. housing market.

Separately, Commerce Department data showed sales of new homes jumped 15.6 percent to a 4-1/2-year high. The percentage increase was the largest in almost 20 years.

Home prices have been rising since last February, helping housing contribute to growth last year for the first time since 2005. Historically low interest rates have also enticed buyers, and Federal Reserve Chairman Ben Bernanke's strong defense of central bank policy suggested those rates would not rise soon.

"There's no doubt when you look at all the housing data that's come out, it certainly paints a picture of continued improvement in that market," said Anthony Chan, chief economist at Chase Private Client.

"You have the best of all possible worlds. You have low mortgage rates, which are going to stay for a while, and you have price appreciation. You take those two things into account and you have a formula for further significant improvement."   Continued...

 
A worker builds a new single-family home in San Marcos, California, in this January 30, 2013, file photo. REUTERS/Mike Blake/Files