Home prices climb by most in six years as market firms
Home prices in 20 U.S. cities rose in November from a year earlier by the most in more than six years, indicating the U.S. housing rebound is gaining ground.
The S&P/Case-Shiller index of property values increased 5.5 percent from November 2011, the biggest year-over-year gain since August 2006, a report showed Tuesday in New York. The median projection of 30 economists surveyed by Bloomberg called for a 5.6 percent advance.
Mortgage rates near a record low are propelling demand for real estate that's outpacing the available supply, a sign prices will keep strengthening. Home-equity gains and an improving job market may help to put a floor under Americans' confidence and spending, the biggest part of the economy, cushioning the hit from a higher payroll tax that began in January.
"With inventory of both new and existing homes still very low, prices will likely continue to rise," Ian Shepherdson, chief economist at Pantheon Macroeconomics Advisors Inc. in White Plains, New York, said in a note to clients. "Each successive price increase adds more weight to the idea that the housing market is recovering, and nothing pulls people into the market faster than the thought that prices will rise further.
Consumer confidence slumped more than forecast in January, reaching the lowest level in more than a year, as higher payroll taxes took a bigger bite out of Americans' paychecks, another report Tuesday showed.
The Conference Board's sentiment index decreased to 58.6, the weakest since November 2011, from a revised 66.7 in December. The January reading was lower than the most pessimistic forecast in a Bloomberg survey, which had a median estimate of 64.
Bloomberg survey estimates ranged from 3.4 percent to 6.4 percent. The S&P/Case-Shiller index is based on a three-month average, which means the November data were influenced by transactions in October and September.
The October reading was revised to show a 4.2 percent year-to-year advance from a previously reported 4.3 percent gain.
Home prices adjusted for seasonal variations climbed 0.6 percent in November from the prior month, matching October's increase. That compares with the Bloomberg survey median of a 0.7 percent rise.
The month-over-month gain was led by San Francisco, followed by Minneapolis.