Largest Gains for Home Prices in 7 Years, Forget Bubble Talk for Now

The fact that the housing market is improving is no longer up for debate. The argument now is over the character of the recovery, and whether the influence of home speculators is a danger.

The S&P/Case-Shiller house-price index of 20 big metropolitan areas rose a seasonally adjusted 1.1% in March from February, the largest monthly gain since April 2006, and was up 10.9% from a year earlier. Existing-home sales have been higher than year-earlier levels for 22 straight months. They recently reached their highest monthly level since government home-buyer tax incentives expired in November 2009.

Home prices are being flattered by a strong-supply-demand mismatch. New-house construction plunged far below normal levels in the deep housing bust, as pent-up demand for single-family dwellings built up amid record-low mortgage rates, foreclosure-plagued markets and weak labor conditions. Builders in some markets report being able almost to name their price on newly constructed houses. (more)

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