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Home Prices Jump As Housing Leads A Mixed Recovery

Home prices climbed at the fastest pace in 6-1/2-years but other data out Tuesday showed shakiness among businesses and consumers, pointing to an economic recovery that remains mixed.

The Case-Shiller 20-city home price index was up 8.1% annually in January, the most since mid-2006. On a monthly basis, prices climbed 1%.

New-home sales fell 4.6% last month to an annualized rate of 411,000, the Commerce Department said, below expectations for a more modest dip from January's 13% monthly surge.

U.S. stock indexes rallied. Shares of homebuilder Lennar (LEN) and KB Home (KBH) edged higher; D.R. Horton (DHI) dipped.

The inventory of new homes continued to inch up but median prices increased 3% in February alone, according to commerce data. A limited pool of existing homes for sale also has helped fuel those values.

But that too is a result of uneven economic trends, as it partly reflects homeowners' unwillingness to sell while they still have negative equity and renters' reluctance or inability to buy.

Still, home prices have been one of the few consistently improving signs that consumers are seeing. Job creation has picked up but pay is still weak. Lawmakers averted most — but not all — tax hikes early this year but let $85 billion in federal spending cuts take effect this month.

The Conference Board's Consumer Confidence Index dived to 59.7 in March from 68 in February as expectations and assessments on current conditions dimmed. That followed a similar sharp drop in the IBD/TIPP Economic Optimism Index.

The payroll tax hikes in the New Year's fiscal cliff deal are seen have some delayed impacts.

"It seems that consumers are finally beginning to realize that their paychecks have shrunk," said BNP Paribas analyst Yelena Shulyatyeva in a research note.

A survey earlier this month for Bankrate.com found 48% of Americans haven't noticed higher payroll taxes, and another 7% say they haven't been affected.

Businesses are taking note of the fiscal policy twists and turns. A near doubling in commercial aircraft orders led by Boeing (BA) sent overall durable goods up 5.7% in February from the prior month. Orders excluding the transportation sector dipped 0.5%, though that followed five straight monthly gains.

Core capital goods orders, a business spending gauge, dropped 2.7% after jumping 6.7% in January as the fiscal cliff pact cleared up some tax uncertainty. Last month's drop is seen due in part to across-the-board federal budget cuts that kicked in March 1.

The Equipment Leasing and Finance Association reported Mon day that new business volume fell 6% in February vs. a year ago.

"The government's inability to manage the finances of the country appears to be affecting the current recovery," Hugh Connelly, president of Univest Capital, said in the ELFA report.