Home prices post sharp increases in January

 Tight housing supply and strong demand in January pushed a leading home price index to notch its sharpest annual increase in more than six years.

The price jumps in big U.S. cities are driving down negative home equity and giving a boost to the new-home market, new data show. The continuing housing recovery should contribute to positive growth as the economy grapples with declines in government spending, analysts said.

The Standard & Poor's/Case-Shiller index of 20 U.S. cities recorded an 8.1% year-over-year increase in January, underscoring the vigor of the recent recovery. It was the biggest year-over-year jump since summer 2006, when home prices peaked during the subprime lending boom. The index was essentially flat compared with December, increasing just 0.1%.

Yet some economists remain concerned that the price gains still depend too much on low mortgage interest rates and the new trend of big corporate investment in housing.

With sources of mortgage credit still tight for everyday buyers, the recovery could stall once cheap money and investor demand wane, said Anthony B. Sanders, a finance professor at George Mason University.

"Who is going to step into the void?" Sanders said.

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