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Home prices jump 8.1 percent in past year
The average home price in the nation's top 20 cities rose smartly by 8.1 percent in the past year — the fastest increase since the peak of the housing bubble in the summer of 2006, according to the S&P Dow Jones index released Tuesday.
All major cities joined in the strong price recovery, which was led by a 23 percent surge in Phoenix home prices. The average price increase in the Washington area between January 2012 and January 2013 was 5.9 percent.
The revival of housing is providing a strong underpinning to the economic recovery this year and is being fed by steady gains in jobs, wealth and confidence among middle-class home buyers. Also adding to the revival has been an influx of investors snapping up bargain properties in foreclosure sales, helping to create shortages of homes for sale in some areas.
"Economic data continue to support the housing recovery," said David M. Blitzer, chairman of the index committee that released the home price report. "This marks the highest increase since the housing bubble burst."
The importance of the housing recovery for the broader economy is hard to overstate, as the collapse in housing in 2007 and 2008 is what dragged the economy into recession, while the deep depression in housing held growth to anemic levels in the first three years of the recovery.
The revival also has come at an opportune time when stimulus spending by the federal government has come to an end and a new era of austerity through higher taxes and spending cuts has taken hold, posing obstacles to the recovery. So far this year, more confident consumers have been able to shrug off the fight in Washington in part because their housing wealth is growing for the first time in years.
"Much of the recent optimism regarding the prospects for a more vigorous recovery of the economy is due to evidence that the housing market is firming," said Joseph Tracy, economist at the New York Federal Reserve Bank.
Despite the positive housing numbers, the leading index measuring overall consumer confidence did take a dip in the latest survey.
The Conference Board, a New York-based private research group, said Tuesday that its Consumer Confidence Index fell in March to 59.7 from a revised reading of 68 in February and the 68.7 that analysts polled by research firm FactSet expected. Confidence is still far off from the 90 reading that indicates a healthy economy.
The index is closely watched by economists because it makes a monthly gauge of how Americans are feeling about their jobs, incomes and other bread-and-butter issues. That's important because consumer spending accounts for 70 percent of U.S. economic activity.
Anxiety about $85 billion in across-the-board government spending cuts that took effect March 1 caused the decline in the index, the group said. The spending reductions have "created uncertainty regarding the economic outlook," Lynn Franco, the Conference Board's director of economic indicators, said in a statement.
⦁ This article was based in part on wire service reports.
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