The Federal Housing Finance Agency (FHFA) house-price index rose 0.8% for February compared with expectations of a 0.2% gain and the January data was revised to show a 0.2% increase from the previous reading of unchanged.
This was the strongest adjusted monthly increase since September 2013 and the year-on-year increase accelerated to 6.4% from 5.7% previously.
On an unadjusted basis, prices rose over 1.0% on the month.
On a monthly seasonally-adjusted basis, prices fell a slight 0.1% in the South Atlantic while all other divisions recorded a monthly increase, including East South Central which rebounded 1.8% following the revised 1.1% decline for January.
The Mountain Division recorded an annual increase of 9.5% from 8.3% previously and continued to record the strongest growth rate with the next strongest reading at 7.6% for the Pacific Division. The slowest gain was for the Middle Atlantic at 4.6% while annual growth in New England strengthened to 6.5% from 3.5% previously.
Mortgage rates have drifted lower over the past few weeks which is liable to trigger further short-term strengthening in the housing market with prospective buyers concerned that interest rates will increase once again later in 2017. Rising prices will also tend to attract buyers into the market, although this will also increase the risk of a sharp correction later in the year.
The Federal Reserve will be monitoring financial conditions closely and a further sustained increase in home prices, allied with stronger equity markets, would increase pressure for interest rates to be increased again to offset a loosening of financial conditions.
US Home Prices