Home prices rose in June to their highest levels in nearly five years, increasing 2.2 percent, according to the Case-Shiller Home Price Indices released Tuesday. The 20-city index was up 12.1 percent from a year earlier, and the companion 10-city index was up 11.9 percent.
Economists surveyed by Bloomberg had expected the 20-city index to increase 2.3 percent from May and 12.2 percent from a year ago.
Case-Shiller’s national index, reported quarterly by Standard & Poor’s, was up 7.1 percent in the second quarter to 146.32, its highest level since third quarter 2008.
All 20 cities included in the survey improved both month-to-month and year-to-year.
The two surveys have improved monthly and yearly for 13 consecutive months.
The national index has improved in four of the last five quarters, dropping only in the fourth quarter of 2012 in that stretch. The 7.1 percent quarter-over-quarter matched the increase in the second quarter of 2012 as the largest quarterly improvement since the national index began in 1987.
The national index was up 10.1 percent year-over-year, matching the gain in the first quarter as the largest annual jump since the first quarter of 2006.
The 10-city index rose to 173.37, up 3.73 from May, to the highest it has been since August 2008 when it was 173.35. The 20-city index rose 3.41 to 159.54, its highest since September 2008 when it was 161.64
In the same month, according to the National Association of Realtors, the median price of an existing single-family home rose 5.4 percent, up 13.3 percent from a year earlier.
According to the NAR, homes prices were held back by sales of distressed homes. Foreclosures, eight percent of transactions, the NAR said, sold for an average discount of 16 percent below market value in June, while short sales, seven percent of transactions, were discounted 13 percent.
Home values improved as well despite higher mortgage rates, which could have both a positive and negative impact: rising rates themselves might bring prices down as buyers look for affordable monthly payments, but also increase demand as buyers try to lock in rates before further increases. The increased demand against weak inventories would send prices up.
While good news for home sellers, the continued sharp increases—the indices have shown double-digit year-year increases for four months in a row —are likely to revive concerns of a growing housing bubble as personal income growth continues to stagnate.
Still the increase in home values, according to economic theory, should mean improved consumer spending. The “wealth effect” theory holds that consumers spend based on increase in net worth, not income. Home values accounted for about 25 percent of the increase in net worth in the first quarter, according to the latest data from the Federal Reserve.
The Case-Shiller Indices have gone up for seven straight months and 13 times in the last 15; each index dipped last October and November.
The monthly increases were led by Atlanta, where prices rose 3.4 percent from May to June. The price index for Atlanta is at its highest level since July 2010. The price index rose 3.3 in June in Chicago, bringing prices there to their highest level since October 2010. Prices rose 2.8 percent each in San Diego and Las Vegas, while prices were up 2.7 percent in San Francisco.
Prices have increase for 16 straight months in San Francisco to the highest level since February 2008. Prices in Las Vegas have increased for 15 straight months and are at their highest level since February 2009.
Prices were up 1.8 percent in Phoenix, the 21st straight month-over-month gain, and 2.3 percent in Los Angeles, the 16th consecutive monthly improvement.
Year-over-year the price gains were led by Las Vegas, where prices were up 24.9 percent since June 2012 and San Francisco, where prices rose 24.5 percent in the last 12 months. Those year-over-year price increases were followed by Los Angeles, up 19.9 percent, Phoenix, up 19.8 percent, and Atlanta, up 19.0 percent.
Despite the June improvement, the 10-city index is down 234 percent from its June 2006 high of 226.29, and the 20-city index is off 22.7 percent from its July 2006 peak of 206.52.