Real Estate is Pacing the U.S. Economy

Housing starts and building permits once again came in strong last week, extending a growth streak that’s been in place for more than a couple of years now.  New homes were started at an annual pace of 917,000, and permits were issued at an annual pace of 946,000.

Home prices also continued their recovery, rising 8.1% in January from year-earlier levels.  The S&P Case-Shiller index, which tracks prices across the 20 largest markets in the nation, posted the biggest year-over-year gain in prices since June 2006.  “This marks the highest increase since the housing bubble burst,” said David Blitzer, chairman of the index committee at S&P Dow Jones Indices.

The report shows the recovery in home prices is widespread. All 20 markets posted a year-over-year gain in home values, and the pace of increase picked up in every market except Detroit.  Some of the markets hurt the most by the bursting of the housing bubble have enjoyed the biggest gains in the last year, led by a 23% rise in Phoenix.  But even with the recent rise in prices, the overall index is down 28.4% from the 2006 peak in prices.

Home prices have been helped in recent months by a number of factors, including tight inventory of homes available for sale, near record-low mortgage rates and a drop in homes in foreclosure. All those factors have driven up home sales. A decline in unemployment is also helping the housing recovery.