* S&P/Case-Shiller composite index up 6.8 percent in year to
* Consumer confidence rebounds in Feb, index rises to 69.6
* U.S. Commerce Dept: New home sales up 15.6 percent in Jan
* Better housing environment boosts Home Depot profits
By Steven C. Johnson
NEW YORK, Feb 26 U.S. home prices closed out
2012 with the biggest annual gain in more than six years while
sales of new homes spiked in January, the latest sign that the
long-suffering housing market was on the mend, data showed on
American consumers, meanwhile, grew more optimistic in
February even as payroll taxes rose and about $85 billion worth
of government spending cuts were due to take effect on March 1.
"The numbers are all pretty strong. It's a significant rise
in confidence and a strong rise in new homes sales -- there is
not really much to argue in those numbers," said David Sloan, an
economist at 4Cast Ltd in New York.
The S&P/Case Shiller composite index of 20 metropolitan
areas showed home prices jumped 6.8 percent year-over-year in
December, the biggest gain since July, 2006, just before the
bottom began to fall out of the U.S. housing market.
Separately, Commerce Department data showed sales of new
homes jumped 15.6 percent to a 4-1/2-year high. The percentage
increase was the largest in almost 20 years.
Home prices have been rising since last February, helping
housing contribute to growth last year for the first time since
2005. Historically low interest rates have also enticed buyers,
and Federal Reserve Chairman Ben Bernanke's strong defense of
central bank policy suggested those rates would not rise soon.
"There's no doubt when you look at all the housing data
that's come out, it certainly paints a picture of continued
improvement in that market," said Anthony Chan, chief economist
at Chase Private Client.
"You have the best of all possible worlds. You have low
mortgage rates, which are going to stay for a while, and you
have price appreciation. You take those two things into account
and you have a formula for further significant improvement."
Major U.S. stock indexes rallied while Treasury yields rose
after the stronger-than-expected data.
Data from the Federal Deposit Insurance Corp showing the
U.S. banking industry recorded the highest earnings last year
since before the financial crisis also contributed to a rosier
CONSUMERS MORE CONFIDENT
Improvements in housing helped lift fourth-quarter profits
at Home Depot. The world's largest home improvement chain
also forecast higher sales and earnings per share for the
current fiscal year. '
Some economists expect rising home prices and recent stock
market gains to blunt the impact of tax increases for consumers,
which should help spending improve in the second half of 2013.
Macy's Inc, which also operates the Bloomingdale's
chain of luxury stores, said Tuesday it expected same-store
sales to rise about 3.5 percent this year.
Consumers were certainly feeling more cheerful in February.
The Conference Board said its consumer confidence index rose
more than expected in February as Americans shrugged off worries
about higher taxes.
But while Washington averted the full brunt of tax increases
and spending cuts that were scheduled to go into effect in 2013,
taxes did rise for some Americans and the payroll deduction
holiday came to an end, leaving consumers with less spending
FEDERAL RESERVE SUPPORT
Government spending cuts worth about $85 billion are also
due at the end of the week unless Washington agrees to postpone
them, and some fear those could take a big bite out of growth
and hurt spending.
What's more, the housing market is far from fully healed.
Some 20 percent of mortgages are underwater and foreclosure
rates remain elevated.
"Housing won't be a huge contributor to growth this year but
we are on the long road to recovery," said Michael Hanson,
senior U.S. economist at Bank of America Merrill Lynch. "But
consumers will need to see that these gains are persistent."
However, Federal Reserve efforts to hold interest rates low,
which involve buying mortgage-backed and other assets each month
until the labor market improves, look set to continue.
Fed Chairman Ben Bernanke on Tuesday strongly defended those
efforts on Tuesday, saying the benefits outweigh the costs.
Minutes from the Fed's last meeting showed some officials
thought the central bank would have to slow purchases before
seeing the hiring increase the program was designed to deliver.
"Bernanke is arguing that continued stimulus is necessary
despite nascent signs of improvement in the economy," said Omer
Esiner, chief market analyst at Commonwealth Foreign Exchange in