Home prices in the U.S. climbed more than forecast in July from a year earlier, adding to signs that housing will spur economic growth.
The S&P/Case-Shiller index of property values in 20 cities increased 1.2 percent from July 2011, the biggest 12-month advance since August 2010, a report from the group showed today in New York. The median forecast of 23 economists surveyed by Bloomberg called for a 1.1 percent gain.
The lowest mortgage rates on record are attracting buyers, helping absorb the supply of distressed properties that had depressed values. A stabilization in residential real estate may also be contributing to recent gains in consumer confidence that, combined with improving household wealth, will lead to a pickup in spending, the biggest part of the economy.
“We’re finally seeing a more sustained and broad-based improvement in home prices,” said Millan Mulraine, senior U.S. strategist for TD Securities in New York, who correctly projected the year-over-year increase. “The housing sector has made an important turn here, and that is being sustained.”
Stock-index futures held earlier gains after the report. The contract on the Standard & Poor’s 500 Index maturing in December rose 0.3 percent to 1,455 at 9:28 a.m. in New York.
Estimates in the Bloomberg survey ranged from gains of 0.3 percent to 2.51 percent. The Case-Shiller index is based on a three-month average, which means the July data were influenced by transactions in May and June.
The 20-city index accelerated after showing a 0.6 percent advance in the year ended June. Year-over-year records began in 2001.
Home prices adjusted for seasonal variations increased 0.4 percent in July from the prior month. Unadjusted prices climbed 1.6 percent from the previous month as all 20 cities showed gains for a third consecutive month.
“All in all, we are more optimistic about housing,” David Blitzer, chairman of the S&P index committee, said in a statement. “Stronger housing numbers are a positive factor for other measures including consumer confidence.”
The year-over-year gauge provides better indications of trends in prices, the group has said. The panel includes Karl Case and Robert Shiller, the economists who created the index.
Sixteen of the 20 cities in the index showed a year-over- year gain, led by a 17 percent increase in Phoenix.
Atlanta showed the biggest year-over-year drop, with prices falling 9.9 percent.
The increase in activity among buyers is lifting homebuilders such as Los Angeles-based KB Home (KBH:US), which reported third-quarter revenue increased 16 percent over the same period last year.
“The housing market recovery is accelerating as inventory continues to decline and prices are now rising,” Jeffrey Mezger, the company’s president and chief executive officer, said on a Sept. 21 earnings call.
Recent reports also show a surge in demand. New-home construction climbed last month, boosted by the strongest pace of single-family starts in more than two years, the Commerce Department reported last week. Purchases of previously-owned homes rose more than forecast in August to a two-year high, figures from the National Association of Realtors showed.
The Commerce Department is scheduled to release data on sales of new homes tomorrow at 10 a.m. in Washington.
More progress in reducing unemployment, which the Federal Reserve targeted in its announcement for additional accommodation measures, may be needed to further boost the industry that helped trigger the recession.
Fed policy makers committed to purchasing $40 billion of mortgage debt a month to lower borrowing costs in order to revive a housing market that Chairman Ben S. Bernanke called “one of the missing pistons in the engine.”
“Our mortgage-backed securities purchases ought to drive down mortgage rates and put downward pressure on mortgage rates and create more demand for homes and more refinancing,” Bernanke said in a Sept. 13 press conference after the central bank announced the debt-buying plans.
The average rate on a 30-year fixed mortgage fell to 3.49 percent in the week ended Sept. 20, matching a record low in data going back to 1972, according to figures from Freddie Mac.
Foreclosures could still be a headwind for homebuilders even as such transactions are slowing. Distressed sales accounted for 22 percent of existing-home purchases in August, the lowest since at least October 2008 when record-keeping began, the Realtors data showed. Such sales are comprised of foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage.
Bloomberg Table ============================================================ 1-months 3-months 1-year 2-years 3-years earlier earlier earlier earlier earlier ============================================================ US Composite-20 1.59% 6.33% 1.20% -2.87% 0.20% ------------------------------------------------------------ Minneapolis 3.69% 11.77% 6.43% -2.86% 3.19% Detroit 3.31% 13.91% 6.24% 8.42% 9.85% Chicago 2.72% 12.23% -0.92% -7.51% -9.06% Atlanta 2.62% 11.45% -9.95% -14.42% -14.48% Phoenix 2.21% 7.53% 16.59% 6.27% 9.90% Miami 2.12% 5.21% 5.35% 0.55% 0.97% San Francisco 1.94% 8.82% 4.75% -1.06% 9.97% Boston 1.81% 6.82% 0.94% -1.01% 1.74% Washington DC 1.47% 6.10% 3.69% 2.66% 8.88% ============================================================ 1-months 3-months 1-year 2-years 3-years earlier earlier earlier earlier earlier ============================================================ Seattle 1.35% 5.93% 3.06% -3.58% -5.13% Los Angeles 1.33% 5.33% 0.45% -3.10% 4.17% Denver 1.32% 5.55% 5.41% 3.16% 3.11% New York 1.22% 4.53% -2.56% -5.59% -4.99% Portland 1.16% 6.46% 3.18% -5.53% -6.62% San Diego 1.11% 3.12% 0.81% -5.18% 3.64% Charlotte 0.90% 3.94% 2.22% -0.81% -4.25% Tampa 0.88% 5.07% 3.58% -2.98% -6.10% Dallas 0.87% 4.11% 3.66% 0.37% -0.05% Las Vegas 0.67% 4.11% -0.95% -6.28% -10.85% Cleveland 0.43% 5.14% 0.43% -4.93% -5.48% ============================================================
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