WASHINGTON (AP) — Home prices were up in most major metropolitan areas in October from a year earlier, pushed up by rising sales and a decline in the supply of available homes. Higher prices show the housing market is improving as it moves into the slow fall and winter sales period.
The Standard & Poor’s/Case-Shiller national home price indexreleased Wednesday showed that prices increased 4.3 percent from October 2011, the largest year-over-year increase in two and a half years, when a home buyer tax credit temporarily increased sales.
Prices rose in October 2012 from a year earlier in 18 of 20 cities. Phoenix led all cities with a 21.7 percent gain, followed by Detroit, where prices increased 10 percent. Prices declined in Chicago and New York.
Home prices fell in 12 of 20 cities in October compared with September. Monthly prices are not seasonally adjusted, so the decreases reflect the end of the peak buying season.
Still, the broader trend is encouraging. October was the fifth straight month of year-over-year gains, after nearly two years of declines. Prices rose in mid-2010 in the final months before the tax credit expired. They had fallen sharply in 2008 and 2009.
“It is clear that the housing recovery is gaining strength,” said David M. Blitzer, chairman of the index committee at S&P Dow Jones Indexes.
The improvement in housing is adding to economic growth and most analysts expect that to continue in 2013, assuming that the White House and Congress can reach a deal to avert economic damage from sharp tax increases and government spending cuts set to take effect on Jan. 1.
“We expect home price appreciation to continue for the foreseeable future, because inventories are lean amid rising sales,” said Joseph LaVorgna, chief United States economist at Deutsche Bank. “This assumes that a resolution to the fiscal cliff is found,” he said. “Otherwise, the recent positive trend in housing would most certainly be in jeopardy along with the rest of the current economic expansion.”
Prices nationwide have recovered to about the same level as in the fall of 2003, according to the Case-Shiller index. They remain about 30 percent below the peak reached in the summer of 2006.
The pace of home construction slipped in November but was still nearly 22 percent higher than a year earlier. Builders are on track this year to start work on the largest number of homes in four years.
Builder confidence rose in December for a seventh straight month to the highest level in more than 6 1/2 years, according to a survey released last week by the National Association of Home Builders/Wells Fargo.