Home Prices Increase Over Last Year

The following are excerpts from a Los Angeles Times article published yesterday:

“The Standard & Poor’s/Case-Shiller index of 20 U.S. cities recorded an 8.1% year-over-year increase in January, underscoring the vigor of the recent recovery. It was the biggest year-over-year jump since summer 2006, when home prices peaked during the subprime lending boom. The index was essentially flat compared with December, increasing just 0.1%.

Yet some economists remain concerned that the price gains still depend too much on low mortgage interest rates and the new trend of big corporate investment in housing.

With sources of mortgage credit still tight for everyday buyers, the recovery could stall once cheap money and investor demand wane, said Anthony B. Sanders, a finance professor at George Mason University.

“Who is going to step into the void?” Sanders said.

The index, created by economists Karl E. Case and Robert J. Shiller, is widely considered the most reliable read on home values. It compares the latest sales of detached houses with previous sales, accounting for factors such as remodeling.

Case, a Wellesley College professor, said Tuesday that the recovery appeared healthy. Although the 8.1% increase is sizable, it does not compare to the double-digit increases recorded during the housing bubble. Prices, as tracked by the index, still remain about 30% off their peak months reached in summer 2006.

Southern California, the Bay Area and other California markets saw sharp price increases and are now clearly in recovery. Over the year, the Los Angeles metro area was up 12.1%, San Diego up 9.8% and San Francisco up 17.5%.”