Home prices climb in December, best yearly gain since 2006

NEW YORK (Reuters) – U.S. home prices picked up in December,
closing out 2012 with the biggest yearly gain in more than six years as the
housing market got back on its feet, a closely watched survey showed on
Tuesday.

The S&P/Case Shiller composite index of 20 metropolitan areas rose 0.9
percent in December on a seasonally adjusted basis, topping expectations for a
gain of 0.5 percent.

Prices in the 20 cities jumped 6.8 percent year-over-year, ahead of
expectations for 6.6 percent and the best yearly gain since July 2006.

“I expect the home price rise to persist in 2013,” said Michelle
Meyer, senior economist at Bank Of America Merrill Lynch in New York.

For the final quarter of the year, prices gained 2 percent on a seasonally
adjusted basis. On a non-adjusted basis, prices were up 0.2 percent in
December.

Last year housing contributed to economic growth for the first time since
2005 as the sector began to recover from its far-reaching collapse. Still, the
market is far from fully healed, with over 20 percent of mortgages underwater
and foreclosure rates still elevated.

Prices have been rising since last February as the supply of available homes
for sale tightened in 2012, helping to stabilize home values. Investors buying
cheap homes to be converted into rentals also supported the market and some
hard-hit areas saw a sharp bounce back in prices. Phoenix, for example, saw
gains of 23 percent compared to December 2011.

“While the economy faces challenges from the fiscal cuts, the housing
market is on a good footing due to low inventory, slow clearing of foreclosure,
steady household formation and more easing of mortgage credits,” said
Meyer.

Atlanta and Detroit racked up their biggest yearly increases since 1991,
when they were first tracked. Prices in the cities climbed 9.9 percent and 13.6
percent, respectively. New York was the only region to decline on a yearly
basis, down 0.5 percent.

U.S. stock index futures saw little reaction to the data, with Wall Street
set for a higher open, while the dollar extended losses against the euro.