Home prices jumped 12.2 percent in May compared with a year earlier, the biggest annual gain since March 2006. The increase shows the housing recovery is strengthening.
The Standard & Poor’s/Case-Shiller 20-city home price index released on Tuesday also surged 2.4 percent in May from April. The month-over-month gain nearly matched the 2.6 percent increase in April from March — the highest on record.
The price increases were widespread. All 20 cities showed gains in May from April and compared with a year earlier.
Prices in Dallas and Denver reached the highest level on records dating to 2000. That is the first time since the housing bust that any city has reached a record high.
A separate report issued on Tuesday showed that Americans’ confidence in the economy fell only slightly in July but stayed close to a five-and-a-half-year high, a sign that consumers should continue to help drive growth in the coming months.
Home values are rising as more people are bidding on a relatively tight supply of houses for sale. One concern is that rising mortgage rates could slow home sales. But many economists say rates remain low by historical standards and would need to rise much faster to halt the momentum.
Svenja Gudell, senior economist at Zillow, a home price data provider, said a big reason for the recent price gains was that foreclosed homes made up a smaller proportion of overall sales. Foreclosed homes are usually sold by banks at low prices.
“Typical home values have appreciated at roughly half this pace for the past several months, which is still very robust,” Ms. Gudell said.
Ms. Gudell said higher mortgage rates and a probable increase in the number of homes for sale in the coming months should slow the pace of price gains and stabilize the housing market.
The S.& P./Case-Shiller index covers about half of American homes. It measures prices compared with those in January 2000 and creates a three-month moving average. The May figures are the latest available.
Despite the recent gains, home prices for much of the country are still about 25 percent below the peaks they reached in July 2006. That is a major reason the supply of homes for sale remains low, as many homeowners are waiting to recoup their losses before putting their houses on the market.
Separately, the Conference Board, a private research group based in New York, said on Tuesday that its consumer confidence index dipped to 80.3 in July. That is down from a reading of 82.1 in June, which was revised slightly higher and was the best reading since January 2008.
Despite the slight drop in July, confidence remains well above year-earlier levels. And consumers are more optimistic about the current job market.
“Over all, indications are that the economy is strengthening and may even gain some momentum in the months ahead,” said Lynn Franco, an economist for the Conference Board.
Amna Asaf, an economist at Capital Economics, attributed the July drop in confidence to rising gasoline prices. But she said the confidence index remained at a level that was consistent with stronger growth in consumer spending in the July-to-September quarter. (AP)