Home prices are also rising steadily, and banks are lending more. Such improvements suggest that the economy is resilient enough to withstand about $85 billion in government cuts that are expected to take effect on Friday.

“The stars are lining up for stronger private sector growth this year,” said Craig Alexander, chief economist at TD Bank.

Sales of new homes jumped nearly 16 percent in January to their highest level in 4.5 years, adding momentum to the housing recovery. Consumer confidence rose in February after three months of declines. And home prices increased in December from the comparable month in 2011 by the largest amount in more than six years.

Over all, tax increases and spending cuts could shave up to 1.2 percentage points from growth this year, economists estimate. Mr. Alexander estimates that without the spending cuts or tax increases, the economy would expand more than 3 percent this year. Instead, he predicts growth of 2 percent.

But growth should accelerate later this year as the effects of the government cutbacks ease, he and other economists say. And several reports on Tuesday suggest that the economy’s underlying health is improving despite the prospect of lower government spending and further budget stalemates.

The Standard Poor’s/Case-Shiller 20-city home price index rose 6.8 percent in December from a year earlier. That was the biggest year-over-year increase since July 2006. Rising home prices tend to make homeowners feel wealthier and encourage more spending. They also cause more people to buy before prices rise further. And banks are more likely to provide mortgages if they foresee higher home prices.

Sales of new homes rose to a seasonally adjusted annual rate of 437,000, the Commerce Department said. Higher sales are keeping the supply of new homes low, even as builders have tried to keep up.

Consumer confidence rose after three months of declines, according to the Conference Board, a business research group. Confidence had plunged in January after higher taxes cut most Americans’ take-home pay. The rebound, though, suggests that some consumers have begun to adjust to smaller paychecks. The consumer confidence index rose to 69.6 in February from 58.4 in January, higher than last year’s average of 67.1.

Bank lending rose 1.7 percent in the October-December quarter, the Federal Deposit Insurance Corporation said. It was the sixth rise in seven quarters. Banks made more commercial and industrial loans to businesses and auto loans to consumers.

The F.D.I.C. also reported that profits at American banks jumped almost 37 percent for the October-December period, reaching the highest level for a fourth quarter in six years as lending increased.

Banks earned $34.7 billion in the last three months of 2012, up from $25.4 billion a year ago and the highest for a fourth quarter since 2006. Sixty percent of banks reported improved earnings from the fourth quarter of 2011, the agency said.

For all of 2012, the F.D.I.C. said bank earnings rose 19 percent to $141.3 billion, the second-highest annual level ever.

Article source: http://www.nytimes.com/2013/02/27/business/economy/home-prices-ended-2012-with-a-gain.html?partner=rss&emc=rss