Home prices in March rose by 10.9% from a year earlier, the largest such gain in seven years, according to an index tracking home prices in 20 U.S. cities.
The Standard & Poor's Case-Shiller index, released Tuesday, showed that all 20 cities had posted year-over-year growth for the third straight month, the latest sign of how tight inventories and growing housing demand have led to a surge in home prices after several years of declines.
There are already signs that home-price appreciation is set to continue its blistering pace this summer because the inventory of homes for sale has remained low and buyer urgency has picked up, fueled by improving consumer confidence and mortgage rates that have been hovering near record lows.
Prices increased in March by 1.4% from February and by 0.3% in February from January, a period in which sales volumes-and, consequently, home-price growth-are typically muted because of winter weather. Home prices haven't increased during the first quarter of the year since 2006, and the quarterly gain of 1.8% this year was the largest for the January-to-March period since 2005.
Rising home prices should help buoy consumer confidence and the broader economy because houses represent the largest financial asset for many Americans. Rising prices could play an important role boosting home sales if they encourage more sellers to test the market. Many sellers have held back from selling at prices that are still down sharply from their peak, and would-be buyers have grumbled over the past year about shortages of desirable pickings.
But some economists and real-estate agents have warned that the current pace of gains isn't sustainable and that some buyers could be priced out of the market, especially once interest rates rise.
Home prices are still down by 28% from their 2006 peak and have returned to levels last seen in late 2003. One year ago, home prices were 35% below the 2006 peak. The Case-Shiller index reached a bottom last March, which means the year-over-year comparisons could begin to show less dramatic growth in the months ahead.
A separate national Case-Shiller index of U.S. home prices, released quarterly, showed that prices rose by 10.2% from one year earlier in March. That was also the largest such gain since 2006.
Many of the largest home-price gains have come in the West, including many markets hit hardest by the foreclosure crisis. In March, prices were up by 22.5% in Phoenix from one year earlier, and by 22.2% in San Francisco. Other cities with double-digit gains included Las Vegas (20.6%); Atlanta (19.1%); Detroit (18.5%); Los Angeles (16.6%); Portland, Ore. (12.8%); Minneapolis (12.5%); San Diego (12.1%); Tampa, Fla. (11.8%); Miami (10.7%); and Seattle (10.6%).
Other price indexes have shown solid but more modest gains in recent months. An index maintained by Lender Processing Services Inc., also released Tuesday, showed that national home prices in March also rose by 1.4% from February and stood 7.6% above levels of one year ago. The index tracks home prices in 15,500 U.S. ZIP Codes.
An index released last week by Zillow Inc. showed that U.S. home values in April rose by 5.2% from one year earlier. The Zillow index estimates changes in home values for 365 metro areas.