The latest report on the S&P/Case-Shiller Home Price Index showed continued momentum in the housing market recovery, posting its largest year-over-year gain in almost seven years.
In the 20-city composite index for February, residential housing prices rose by 9.3 percent compared to February 2012, representing the biggest increase since May 2006. Economists were aiming high as well, anticipating an increase of 9.0 percent. In January, the index rose 8.1 percent compared to January 2012.
On a seasonally adjusted basis, home prices rose 1.2 percent in February from January. In January, prices increased 1.0 percent from December.
The index gathers its prices based on a three-month average, meaning that February’s figures were a gauge of sales during January through December.
“Seasonally adjusted monthly data show all 20 cities saw higher prices for two months in a row – the last time that happened was in early 2005,” said David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices.
In the twelve months ended February 2013, prices in the 10-city composite index rose by 8.6 percent.
A dwindling inventory has been attributed to rising costs in the past year. Now, the rising prices may serve as a catalyst for some homeowners to decide to put their house up for sale, which could help replenish the inventory levels. Historic lows for interest rates have also stoked the housing market recover. The Federal Reserve is again expected to keep its key interest rate near zero when it makes a interest-rate decision and announcement on Wednesday.
Housing continues to be one of the strongpoints in gross domestic product. The latest GDP report last Friday showed that residential investment accelerated in the first quarter from the fourth quarter.
All 20 cities recorded year-over-year increases in both January and February. 16 of the 20 cities annual growth rates increased in February compared to January. Detroit, Miami, Minneapolis and Phoenix were the only cities to notch modest month-to-month declines.
Phoenix may have seen price increases decelerate a bit, but the city still posted impressive 23 percent gains in the past year to February. San Francisco was not far behind with an 18.9 percent rise in home values, followed by Las Vegas and Atlanta at 17.6 percent and 16.5 percent, respectively. Homes in Detroit have recovered to the tune of 15.2 percent increases in the past year.
New York recorded the smallest gain at 1.9 percent, followed by Chicago at 5.1 percent.
Atlanta (+16.5%) and Dallas (+7.1%) had their largest annual growth rates in the history of index.
The across-the-board advancements are certainly encouraging, although both the 10-city and 20-city composites are still about 30 percent below 2006 peaks before the markets collapsed.
The markets are puttering along with the better-than-expected report, following a strong climb on Monday. The Dow is off by 31 points and the S&P 500 is down by 1 point, while the Nasdaq has risen 5 points just over one hour into the trading session.