6.3% home-price rise best since ’06

A Realtor’s sign marks a house under contract in Glen., Ill., in October.
A Realtor’s sign marks a house under contract in Glen., Ill., in October.

— A measure of U.S. home prices rose 6.3 percent in October compared with a year ago, the largest yearly gain since July 2006.

Core Logic also said Tuesday that prices declined 0.2 percent in October from September, the second drop after six straight monthly increases. The monthly figures are not seasonally adjusted. The real estate data provider said the decline reflects the end of the summer homebuying season.

“The housing recovery that started earlier in 2012 continues to gain momentum,” said Mark Fleming, CoreLogic’s chief economist. “The recovery is geographically broad-based with almost all markets experiencing some appreciation.”

Steady price increases are helping fuel a housing recovery. They encourage more homeowners to sell their homes. And they entice would-be buyers to purchase homes before prices rise further.

Home values are rising in more states and cities, according to the report. Prices increased in 45 states in October, up from 43 the previous month. The biggest increases were in Arizona, where prices rose 21.3 percent, and in Hawaii, where they were up 13.2 percent.

The five states where prices declined were: Illinois, Delaware, Rhode Island, New Jersey, and Alabama.

In 100 large metropolitan areas, only 17 reported price declines. That’s an improvement September, when 21 reported declines.

The Arkansas Realtors Association said the average home price in Arkansas rose in October to a little more than $157,200, up 7.8 percent from October 2011.

Mortgage rates are near record lows, while rents in many cities are rising. That makes home buying more affordable, driving demand.

At the same time, the number of available homes is at the lowest level in 10 years, according to the National Association of Realtors. The combination of low inventory and rising demand pushes up prices.

Last week, an index measuring the number of Americans who signed contracts to buy homes in October jumped to the highest level in almost six years. That suggests sales of previously owned homes will rise in the coming months.

Builders, meanwhile, are more optimistic that the recovery will endure. A measure of their confidence rose to the highest level in six and a half years last month. And builders broke ground on new homes and apartments at the fastest pace in more than four years in October.

“We’re in the very early stages of a reinforcing cycle,” said Michelle Meyer, a New York-based senior economist at Bank of America, the second-biggest U.S. lender by assets.

Meyer predicts monthly housing starts could exceed 1 million at an annual rate by the end of 2013, compared with 894,000 in October. Residential construction may add to economic growth this year for the first time since 2005, boosting gross domestic product by 0.3 percentage point, said Deutsche Bank’s Joseph LaVorgna. That contribution may double next year and reach 1 percentage point when related industries such as furnishings and remodeling are added, he said.

“The one thing missing from this economic recovery was a healthy contribution from housing, and we might finally be on the cusp of that,” said LaVorgna, chief U.S. economist for Deutsche Bank in New York, who predicts GDP may grow about 2.5 percent in 2013. “Housing is going to be integral to the economy. We’re assuming it continues to do some of the heavy lifting.”

Information for this article was contributed by Christopher S. Rugaber of The Associated Press, by Jim Puzzanghera of the Los Angeles Times, and by Jeff Kearns and Shobhana Chandra of Bloomberg News.

Business, Pages 25 on 12/05/2012

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