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US house prices enjoy biggest increase for nearly seven years

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US house prices accelerated by the most in nearly seven years in March as the spring buying season gave the sector traction, while surging consumer confidence pointed to some resilience for the economic recovery.

New data published yesterday also suggested the two segments could act as buffers as the broader economy faces the pinch of belt-tightening in Washington.

The S&P/Case Shiller composite index of 20 metropolitan areas climbed 10.9pc year over year, beating expectations for 10.2pc. This was the biggest increase since April 2006, just before prices peaked in the summer of that year.

PRICES

Prices in the 20 cities gained 1.1pc in March compared to the month before, on a seasonally adjusted basis, topping economists' forecasts for a 1pc rise.

The housing market turned a corner in 2012, several years after its far-reaching collapse.

The recovery has picked up since as inventory has tightened, foreclosures eased and historically low mortgage rates have attracted buyers.

A Reuters poll showed the recovery in the housing market likely has momentum through the rest of the year, with economists ratcheting up their forecasts for price gains in 2013.

Separate data showed consumer confidence picked up in May to its highest in more than five years in the midst of a stockmarket rally and lower petrol prices.

Housing and the consumer have shown strength even as there have been hints that tighter fiscal policy is starting to bite in the broader economy. Across-the-board US government spending cuts of $85bn (€66bn) went into effect in March; while the income tax holiday expired at the beginning of the year, raising taxes for many Americans.

The data suggested both areas were performing better than the overall economy, said Sam Bullard, senior economist at Wells Fargo in Charlotte, North Carolina.

STOCK VALUES

"There are some individual circumstances that are helping to propel both of these a little bit stronger than what the actual underlying strength would suggest," said Mr Bullard, pointing to the effect of higher stock prices on consumers, and investor demand for homes in beaten-down regions lifting prices.

Economists expect the pace of growth likely cooled in the second quarter, partly due to tighter fiscal policy, but the second half of the year is seen regaining traction. Investor attention has turned to when the Federal Reserve might start to slow its economic stimulus efforts.

The data lent support to equities where Wall Street rallied more than 1pc after comments from central banks around the world reassured investors that supportive monetary policies would remain in place.

Home prices in Phoenix continued their sharp ascent, rising 22.5pc from a year earlier.

Other standouts included San Francisco, up 22.2pc, and hard-hit Las Vegas, up 20.6pc. (Reuters)

Irish Independent