Climbing home prices seem to be lifting household wealth and boosting the purchasing power of consumers. A drop in foreclosures is giving banks more leeway to lend. The impact of the housing industry will help the economy withstand looming financial cuts by the federal government and tax increases. Economist Karl Case estimates consumption will increase by $80 million in 2013 because of the rise in housing prices.

The S&P/Case-Shiller property values index increased 5.5 percent in 20 American cities in the year 2012 through November—the biggest gain since August 2006.