House prices in March rose by 10.9 percent from a year earlier, the largest such gain in seven years, according to an index tracking home prices in 20 U.S. cities.
The Standard & Poor's Case-Shiller index showed that all 20 cities had posted year-over-year growth for the third straight month, the latest sign of how tight inventories and growing housing demand have led to a surge in home prices after several years of declines.
There are already signs that house-price appreciation is set to continue its quickening pace this summer because the inventory of homes for sale has remained low and buyer urgency has picked up, fueled by improving consumer confidence and mortgage rates that have been hovering near record lows.
Prices increased in March by 1.4 percent from February and by 0.3 percent in February from January, a period in which sales volumes and home-price growth are typically muted because of winter weather. House prices haven't increased during the first quarter of the year since 2006, and the quarterly gain of 1.8 percent this year was the largest for the January-to-March period since 2005.
Rising home prices should help buoy consumer confidence and the broader economy because houses represent the largest financial asset for many Americans. Rising prices could play an important role boosting home sales if they encourage more sellers to test the market. Many sellers have held back from selling at prices that are still down sharply from their peak, and would-be buyers have grumbled over the past year about shortages of desirable pickings.
But some economists and real-estate agents have warned that the current pace of gains isn't sustainable and that some buyers could be priced out of the market, especially once interest rates rise.
Home prices are still down by 28 percent from their 2006 peak and have returned to levels last seen in late 2003. One year ago, home prices were 35 percent below the 2006 peak. The Case-Shiller index reached a bottom last March, which means the year-over-year comparisons could begin to show less dramatic growth in the months ahead.
A separate national Case-Shiller index of U.S. home prices, released quarterly, showed that prices rose by 10.2 percent from one year earlier in March. That was also the largest such gain since 2006. Other price indexes have shown solid but more modest gains in recent months.