U.S. home prices in October saw the biggest jump in more than seven years, according to the S&P/Case-Shiller index of property prices. The index rose 13.6 percent year-over-year, the biggest gain seen since February 2006, and the strong numbers are an indication that the real estate recovery is continuing to boost household wealth, according to analysts.
A decreasing inventory of foreclosed properties has somewhat tempered the supply of homes nationally, and pushed prices upward, even in the face of higher mortgage rates.
“There’s certainly room for home prices to continue rising in the coming year,” Credit Suisse economist Dana Saporta told Bloomberg News. “As home prices continue to rise, more and more homeowners who are underwater on their mortgages will see their financial situations improving. Just getting out of that underwater position should be a big help to the economy.”
But David Blitzer, chairman of the S&P index committee, said that the Federal Reserve’s policy on bond-buying going forward is still a major factor in housing prices and the recent gains may be a temporary blip.
“Other housing data paint a mixed picture suggesting that we may be close to the peak gains in prices,” Blitzer said in a statement to Bloomberg News. [Bloomberg News] – Hiten Samtani