Home Prices in 20 U.S. Cities Rise Most Since February 2006

Home prices in 20 U.S. cities rose by the most since February 2006 in the 12 months through September, showing the housing market sustained progress even as borrowing costs climbed.

The S&P/Case-Shiller index of property values advanced 13.3 percent after increasing 12.8 percent a month earlier, the group said today in New York. The median forecast in a Bloomberg survey of 31 economists called for a 13 percent advance.

Sellers are standing firm on asking prices as buyers compete for a limited number of available properties. Higher home values are helping propel gains in Americans’ net worth, boosting confidence among homeowners and creating momentum for consumer spending.

“Housing demand has clearly improved this year,” said Ryan Wang, an economist at HSBC Securities USA Inc. in New York who projected a 13.2 percent year-over-year increase. “The housing market has benefited from fewer foreclosures over the last year, the share of distressed housing transactions is back to pre-crisis levels, and that has helped to boost home prices in many parts of the country.”

Bloomberg survey estimates ranged from increases of 12.4 percent to 13.5 percent. The S&P/Case-Shiller index is based on a three-month average, which means the September data were influenced by transactions in July and August.

Building Permits

Other figures showed more applications for home construction were issued in October than at any time in the past five years. Building permits increased 6.2 percent last month to a 1.03 million annualized rate, the most since June 2008, the Commerce Department said today.

Figures for housing starts, which usually accompany the permits data, are delayed until Dec. 18 because last month’s government shutdown kept the agency from gathering the data in time.

Stocks were little changed after the figures. The Standard& Poor’s 500 Index rose 0.1 percent to 1,804.62 at 9:35 a.m. in New York.

Today’s S&P/Case-Shiller report also included quarterly figures for the market nationally. Prices covering all of the U.S. climbed 11.2 percent in the third quarter from the same period in 2012, the biggest increase since the first three months of 2006, compared with a 9.9 percent gain in the quarter ended in June.

Monthly Gain

Home prices adjusted for seasonal variations increased 1 percent in September from the previous month, compared with a 0.9 percent gain in August. The Bloomberg survey median called for a 0.9 percent rise. Unadjusted prices climbed 0.7 percent in September after a 1.3 percent gain as 19 of the 20 cities showed advances.

The year-over-year gauge, which includes records going back to 2001, provides a better indication of price trends, the group has said.

All of the 20 cities in the index showed an increase in year-over-year prices, led by gains of 29.1 percent in Las Vegas and 25.7 percent in San Francisco. The smallest gain was in New York, which showed a 4.3 percent advance.

Monthly figures show price increases were slowing in parts of the country, including Las Vegas, Los Angeles, Tampa and San Diego.

“Other data suggest a market beginning to shift to slower growth rather than one about to accelerate,” David Blitzer, chairman of the S&P index committee, said in a statement. “Existing-home sales weakened in the most recent report, home construction remains far below the boom levels of six or seven years ago and interest rates are expected to be higher a year from now.”

FHFA Prices

Figures today from the Federal Housing Finance Agency showed home prices climbed 0.3 percent in September, the smallest increase in a year, after a 0.4 percent gain in August. The agency’s data reflect sales price information from mortgages sold to or guaranteed by Fannie Mae and Freddie Mac.

Purchases of previously owned homes fell in October to a 5.12 million annual rate, the lowest level in four months, according to the National Association of Realtors. The median price of existing property increased 12.8 percent in October from the year before, to $199,500, the figures showed.

Contract signings for the purchase of previously owned homes fell for a fifth straight month in October, the group’s data showed yesterday.

Borrowing costs have climbed from record lows. The average rate on a 30-year fixed mortgage was 4.22 percent in the week ended Nov. 21, up from 3.31 percent last November, the lowest in records dating to 1972.

Builder Sentiment

The National Association of Home Builders/Wells Fargo index of builder sentiment held in November at a four-month low.

“For the Fed, while rising prices will be taken as a positive for spending activity, the souring tone in sales activity will provide some cause for concern about the sustainability of the recovery and price gains in this crucial sector of the economy,” Millan Mulraine, director of U.S. rates research at TD Securities USA LLC in New York, said in a note to clients.

While policy makers probably won’t be dissuaded from easing their $85 billion in monthly asset purchases by a slowdown in housing, “it is likely add to the debate on providing stimulus through other non-quantitative approaches,” Mulraine wrote.

Strength in the housing market this year has benefited companies including Williams-Sonoma Inc., which sells home goods and furniture.

“We do believe that people feel better about spending money on their home because the value of their homes are no longer dropping,” chief executive officer Laura Alber said in a Nov. 20 conference call. “I think it’s probably early innings of housing recovery.”

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