Residential real estate prices increased in January by the most since June 2006, indicating the U.S. housing market strengthened at the start of the year.
The S&P/Case-Shiller index of property values in 20 cities climbed 8.1 percent in January from the same month in 2012 after rising 6.8 percent in the year ended in December, the group said today in New York. The increase exceeded the 7.9 percent median forecast by economists in a Bloomberg survey.
Improving home values will lure more buyers into the real estate market by inducing current owners to put their properties up for sale and prompting builders to begin work on new dwellings. Historically low lending rates and a stronger labor market have helped fueled the rebound in housing, which is a source of strength for the economy.
“The housing market keeps on recovering,” said Christophe Barraud, an economist at Market Securities-Kyte Group in Paris. He correctly projected the January gain and is the third-best forecaster of home prices in the past two years, according to data compiled by Bloomberg. “Interest rates are staying low, which means more first-time homebuyers.”
Estimates for the year-over-year price change ranged from increases of 6 percent to 8.9 percent, according to forecasts from the 30 economists surveyed. The Case-Shiller index is based on a three-month average, which means the January figure was influenced by transactions in December and November.
All 20 cities in the index showed a year-over-year increase, led by a 23.2 percent surge in Phoenix. The change in home prices in New York, up 0.6 percent, turned positive after declining during the previous 28 months.
Home prices adjusted for seasonal variations rose 1 percent in January from the prior month after a 0.9 percent gain in December. Phoenix and San Francisco showed the biggest adjusted monthly increases, with prices climbing 1.9 percent in both metropolitan areas. Atlanta posted a 1.8 percent gain, while values advanced 1.7 percent in both Las Vegas and Tampa, Florida.