Single-family home prices showed an accelerated growth in January 2013.

Home prices jumped up 8.1 percent in the 12 months ending in January, according to the data of the Case-Shiller 20-city index, released today by S&P Dow Jones Indices.

Economists say they are seeing a sustained rebound in housing market after three years of struggles. “Prices and buying conditions are currently at the most favorable levels we have seen in generations,” said Millan Mulraine, an economist for TD Securities.

The data in the chart below is provided by FRED and shows seasonally adjusted Case-Shiller 20-City Home Price Index.

Sales of existing homes, which rose in 2012 to the highest level in five years, gained 0,4 percent to a seasonally adjusted rate of 4.92 million in January, according to National Association of Realtors.

New home sales rose 15.6 percent above the revised December rate of 378,000, based on data released by the U.S. Census Bureau and the Department of Housing and Urban Development.

The growing number of sales shows the strengthening demand for homes. But a continuing decline in inventory on the market drives home prices up.

“I think the big difference — we don’t have this huge glut of unsold inventory weighting on prices,” said Mulraine. He said foreclosures had a downward pressure on home prices resulting in “a number of potential buyers sitting on a fence, waiting for a more attractive entry point.” Now those people are rushing to buy.

All major cities showed annual gains in home prices. New York, after posting 28 consecutive months of decline, finally came into positive territory.
Detroit is the only city that showed slower growth, keeping a flat rate on a monthly return. Economists think that prices might be a seasonally affected.
“The housing market in northern metro areas pretty much freezes every winter,” said Michael Zoller, an economist at Moody’s.

Phoenix, San Francisco and Las Vegas are on the leading positions with their highest annual gains of 23.2 percent, 15.3 and 17.5 percent, respectively.

“We are seeing big shifts right now on individual buyers feeling safe about buying, which is funny because the prices are up so much,” said Katrina Barret, a founder of Lawyers Real Estate agency in Scottsdale, Ariz.
Barret said a majority of people rushing to buy right now are new homebuyers who never ruined their credit and turn to buying from renting.

“There is quite an arbitrage of buying versus renting,” Barret said. “It might cost double to rent the same property that you can buy with a loan.”

However, some people who can afford to buy a house still prefer to rent because they want to stay mobile in a growing job market.

“I think owning a home you live in is a liability, and anyone who considers it part of wealth is pretty naïve,” said Richard Tarjeft, an email-marketing director at Xhibit Corp.

Tarjeft, 29, accepted a job in Scottsdale and moved there in September 2011. Since then he has been renting a house. He is not married, has no kids and is a young professional who prefers to keep his options open. He doesn’t rush into any long-term responsibility.

“Renting will always be acceptable to me if I have better use of my capital,” he said. “If I find a house, I actually see myself in it for 10 years or more.”

Barret said Tarjeft got a good deal and pays about the mortgage rate, but most tenants are overpaying that price.

Home prices are going up nationwide at pace depending on the region’s overall economy. Economist forecast a 5 percent gain in home prices by the end of the year.
Zoller said housing is contributing to overall economic growth by picking up construction and renovation and creating a wealth effect.

“But these factors are more like icing on the cake,” he said. “The US recovery will have to turn to the domestic labor market and export demand to drive job creation and production gains.”