February home prices posted their first annual increase since the end of 2006 which has been attributed by the temporary tax credits for homebuyers.
According to the Standard & Poor's/Case-Shiller home price index, which was released today, showed a 0.6 percent gain. Analysts had expected that number to be double.
The data underscored the mixed and fragile nature of the housing recovery. Since May 2009 nationally home prices are up more than 3 percent, however unfortunately they are still are 30 percent below the peak that was reached in May 2006.
The good news is that home prices are getting help from the two temporary tax credits that are set to expire this Friday. Both the first-time home buyer's tax credit of $8,000 and the $6,500 tax credit for current homeowners who want to buy and relocate are helping areas such as San Francisco which is up 12 percent, the best in the index. Other area's such as Los Angeles, San Diego and Washington also have had price gains of more than 5 percent.
When prices rebound it is considered a boost in consumer optimism and in turn helps to revive the economy. For most American's a home is the largest and most important financial asset they will ever acquire. So, as home values climb, homeowners then begin to feel wealthier and more comfortable spending.
Furthermore, rising home prices help to rebuild equity for homeowners who owe more on their mortgages than their properties are worth.
With the upbeat economic news, the economic recovery is gathering steam and Americans' confidence in the economy rose this month to their highest level since September 2008 when the financial crisis began to really escalate.