Home prices increased in September, a leading gauge shows, indicating that a moderate but stable housing recovery is underway after several months of improvement.
The Standard & Poor's/Case-Shiller home price index for the 20 largest metropolitan areas in the country rose 0.3% from August and 3.0% from September 2011. It was the sixth consecutive month-over-month increase and the fourth consecutive year-over-year bump.
Dwindling supply, low levels of new construction and record-low mortgage rates have helped boost housing this year. In September, 13 areas tracked by the Case-Shiller index posted gains over August, and 18 posted year-over-year increases.
"With six months of consistently rising home prices, it is safe to say that we are now in the midst of a recovery in the housing market," said David M. Blitzer, chairman of the index committee at S&P; Dow Jones Indices.
Leading the home price recovery in major metro areas is Phoenix, one of the places that saw some of the steepest declines during the bust. It posted a 1.1% gain from August, and its 20.4% increase from September 2011 was the biggest year-over-year gain among the 20 areas.
Las Vegas posted a notable month-over-month increase, up 1.4%. California cities also improved from the prior month, with Los Angeles up 1.0%, San Diego up 1.4% and San Francisco up 0.5%.
The index is subject to seasonal variations, and economists have warned that the month-over-month data might dip once the traditionally slower fall and winter months are included. Nevertheless, many see the housing market continuing to improve through next year, with construction jobs, home buying and redecorating activities all adding to economic growth.
Gus Faucher, senior economist for PNC Financial Services Group, said demand for housing is strong because many people who had delayed buying houses during the downturn are now eyeing the market to take advantage of record low interest rates and high affordability.
"There is significant pent-up demand out there for homes," Faucher said. "You have people who put off purchasing homes because they were concerned about their job situations.
"We are set for a period for a couple of years where housing is going to be a contributor to economic growth."
Although housing is recovering, a sharp increase in prices is unlikely. Lenders remain cautious, and government scrutiny of low-down-payment buyer programs and housing finance is likely to increase in coming years.
The sum of recent housing data — improving construction starts, declining inventory, stronger sales figures and increases in pricing — indicate housing is on firmer ground, said Michael D. Larson, a housing and interest rate analyst for Weiss Research.
"It's all pointing to a general rebound in housing, albeit a muted one," Larson said. "This is not what we saw in the early 2000s, and that is probably a good thing. It is a slow and steady climb out of where we were."
A separate index of national home prices released quarterly also showed gains. The S&P;/Case-Shiller national composite index rose 2.2% in the July-through-September period compared with the second quarter of 2012 and 3.6% from the third quarter of 2011.
The Case-Shiller indexes, created by economists Karl E. Case and Robert J. Shiller, are widely considered the most reliable gauges of home values.
The indexes compare the latest sales of detached houses with previous sales and account for factors such as remodeling that might affect a house's sale price over time. The index for 20 major U.S. cities is a moving average of home sales combining three months of data, so September's figures are a combination of price performance in July, August and September.