June 5th, 2013
Home prices increased at the fastest rate in nearly seven years in March 2013, an S&P/Case Shiller report revealed. The S&P composite index of 20 major metropolitan areas rose by 10.9 percent over the last 12 months, unexpectedly beating out former projections of 10.2 percent.
This marks the most significant increase in home prices since April 2006, and is an important milestone reached by the housing market recovery. Despite fears that these increases could be the result of another housing bubble, the Case Shiller report also noted that current home prices are still 28 percent lower than they were during their 2006 peaks.
Consumer confidence is on the rise as well – mortgage rates are low, allowing for easier access to the housing market for new buyers. 2012 was a pivotal year for the real estate recovery, as inventory narrowed, mortgage rates dropped and foreclosures declined.
Economists are optimistic about these statistics. Michael Gapen, an economist at Barclays, stated that in conjunction with low inventories, an increased demand for housing has helped drive the recovery.
“We see these factors as remaining in place and expect residential investment to add to GDP growth in the coming quarters,” Gapen said. “We also expect rising real estate wealth to support household balance sheets and underpin consumption, helping the broader economy to offset a substantial fiscal drag in 2013.”