The Case-Shiller home price index is the best measure of US home prices, and it most recently showed that US home prices rose by 8.1 per cent in 20 big cities in the year to January. They fell by 20 per cent in a year at the depth of the global crisis.
All 20 US cities in the index posted gains, and in 19 cities the rate of improvement accelerated.
Gains were also strongest in cities that were hit hardest during the crisis. Prices in January were 13.4 per cent higher than a year ago in Atlanta, 13.8 per cent higher in Detroit, 15.3 per cent higher in Las Vegas, 12 per cent higher in Los Angeles, 10.8 per cent higher in Miami and a whopping 23.2 per cent higher in Phoenix.
The index also shows that over the long term many US home owners are sitting on solid capital gains.
Los Angeles prices are 80 per cent higher than they were in 2000. Prices in Miami are up 53.5 per cent over the same period. Prices in Washington are 87 per cent higher, and New York prices are 62 per cent higher. Other cities are weaker. Detroit homes are 20 per cent below their 2000 level, Atlanta prices are still only 3.1 per cent higher and Las Vegas is still only up 4 per cent.
Across Case-Shiller's 20 city sample however, prices are 50 per cent higher than they were 13 years ago. New-home construction in the US is also now at its highest level in a half-decade. Starts rose by 7.1 per cent to a 1.04 million annual rate in January, well above the consensus forecast of 930,000. Starts are not back to pre-crisis levels but, of course, nobody wants them to be. They ran at about 1.5 million a year in the '90s, and low interest rates and reckless lending practices fuelled by the junk bond boom pushed them above 2 million a year in 2003. They were back to 1.5 million a year by the end of 2006 as the first signs of serious stress in the junk bond market appeared, and were struggling to stay above 1 million a year when 2008 started. They bottomed out during the crisis at a rate of just 478,000 starts a year.
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