WASHINGTON — Prices for U.S. homes leapt in April, posting record monthly growth and the fastest year-over-year growth in seven years, according to Standard & Poor’s/Case-Shiller data released Tuesday.
With gains in 19 of 20 cities, the 20-city composite index rose 2.5 percent in April, the largest monthly growth on record. The data go back to 2000. After seasonal adjustments, prices rose 1.7 percent in April.
Compared with the same period in the previous year, prices in April rose 12.1 percent, the fastest annual pace since 2006, according to the report. Still, the 20-city composite index indicated prices remain about one-quarter below a 2006 peak.
San Francisco posted the largest year-over-year price growth at 23.9 percent, while New York had the lowest at 3.2 percent.
The report is good news for growth, wrote Jim O’Sullivan, chief U.S. economist at High Frequency Economics, in a research note.
There is “increased consumer spending because of wealth and confidence effects, increased incentive to buy before prices go up some more, and increased incentive to lend because of less chance of mortgages turning delinquent,” O’Sullivan wrote.
But there’s also concern that prices are rising too quickly and that some would-be participants, such as first-time owners, are being priced out.
Economists expected U.S. home prices to rise in April, supported by low inventory and demand spurred by low interest rates. As home prices continue to rise, more sellers are able and willing to put their homes on the market. Rising prices also induce buyers to bid before they are priced out of the market.
While low interest rates have been fueling demand, rates have trended higher in recent weeks. After a news conference last week by Federal Reserve Chairman Ben Bernanke, Treasury yields jumped.
As with rising prices, rising rates curb demand among some buyers, but spur others to quickly enter the market to take advantage of high affordability. A Tuesday report on new homes showed that sales rose last month to their highest rate since 2008, and that median prices rose 10 percent from the same period last year.
Despite their recent climb, mortgage rates remain relatively low, as Bernanke recently said. While there are fears that rising rates will hurt the housing market’s recovery, economists say tight credit standards are the greatest challenge current buyers face.
A separate home price report released Tuesday showed a milder gain. The Federal Housing Finance Agency reported that prices rose a seasonally adjusted 0.7 percent in April.
