Home
prices are up for the 2nd straight quarter, the biggest year-over-year increase
in more than two years.
NEW
YORK (CNNMoney) -- In another sign of a housing market rebound, home prices
posted the biggest percentage gain in more than two years in the third quarter,
according to the closely followed S&P/Case-Shiller index.
The
3.6% increase from a year earlier is more than three times the rise in the
previous quarter and was the biggest jump in prices since the second quarter of
2010. But that 2010 rise was much more of a temporary blip caused by a homebuyer's tax
credit of up to $8,000 on homes purchased in late 2009 and early
2010.
This
latest rise comes as the housing market has shown numerous other signs of
recovery in recent months. The rebound is spurred by a combination of record low
mortgage rates, an improving jobs
market and a drop in foreclosures
to a five-year low, reducing the supply of distressed homes available. There is
also a tighter supply of both new and previously owned homes on the market.
The
improvement in housing market fundamentals have helped to lift the pace of both
home sales
and home building.
Dean
Baker, the co-director of the Center for Economic and Policy Research who was
one of the earliest economists to warn about the housing bubble and the trouble
that lay ahead, said this recovery in the housing market should lead to some
sustained housing price increases in the coming years.
"I've
been an optimist as of late," he said. "Some think it'll get back to
bubble prices and that's crazy. But we'll probably do better than inflation for
the next few years, and people who have been underwater on their mortgage will
get out from that, and build some equity."
The
latest rise in the Case-Shiller index was the second straight quarter of
year-over-year improvement, while the monthly annual reading has climbed for
four months in a row, with six straight month-over-month increases.
"With
six months of consistently rising home prices, it is safe to say that we are
now in the midst of a recovery in the housing market," said David Blitzer,
chairman of the index committee at S&P Dow Jones Indices.
The
increases are widespread, with only two of the 20 cities tracked by index --
Chicago and New York -- showing modest price declines from a year earlier. The
biggest rise was in Phoenix, one of the cities hardest hit when the housing
bubble burst. Prices there in September were 20.4% higher than a year ago.
"Home
price gains are becoming more widespread across cities, and some of the largest
rebounds have been in areas that were most heavily affected during the initial
housing slump," said Cooper Howes, an economist with Barclays Capital.
"We expect this trend to persist into next year as part of a broad-based
housing recovery that includes starts, sales and prices"
Home
prices are now back to where they were in early 2003, before the housing bubble
inflated over the next three years before bursting. Even with the recent gain,
the national index is down 28.6% from the peak level reached the first quarter
of 2006.
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