The U.S. residential real estate market continues to recover with prices rising for the 13th month in a row, according to the S&P/Case-Shiller Home Price Index, released Tuesday morning.
The seasonally adjusted 20-city home price index rose 1.2 percent month-to-month in February, the 13th consecutive gain. In January, the index rose 1 percent.
“For the 65 percent of households that own their home, rising prices boost wealth,” said Jim O’Sullivan, chief U.S. economist with High Frequency Economics.
On a year-over-year basis, the index increased 9.3 percent, up from 8.1 percent in January, the strongest since prices began to slow in 2006, O’Sullivan said.
“More broadly, the plunge in home prices was a key factor behind the deep recession and slow recovery, and a turnaround in prices will help boost the recovery through wealth and confidence effects. Rising prices may also encourage procrastinators who have been considering buying to move more quickly, and should also eventually encourage banks to start easing up again on mortgage lending standards.”
The four cities with the highest year-over-year price increases were Phoenix, San Francisco, Las Vegas and Atlanta.
“Atlanta recovered from a wave of foreclosures in 2012 while the other three were among the hardest hit in the housing collapse. At the other end of the rankings, three older cities – New York, Boston and Chicago - saw the smallest year-over-year price improvements,” said David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices, in a statement.
Stan Humphries, chief economist of online real estate marketplace Zillow, said home values are “clearly rising at an unsustainable pace” but the report was not wholly reflective of nationwide trends.
Last week, a report by Zillow indicated the rate of home value appreciation was slowing.
“As these incredible price increases continue, there is a serious risk of future affordability issues once interest rates begin to rise. This report needs to start being taken with a grain of salt,” he said. “The appreciation rates we’re currently seeing in the Case-Shiller composite are not broadly reflective of what’s happening in the national housing market right now. It is overly skewed to quickly rebounding markets -particularly in the Southwest and on the West Coast – and is being boosted by a shift in transactions away from foreclosure re-sales. It is not helpful information for consumers.”