Michelle Jamrisko
Bloomberg News

Home prices climbed in October by the most in more than two years as the real estate market rebounds and contributes to the economic recovery.

The Standard & Poor’s/Case-Shiller index of property values in 20 cities increased 4.3 percent from October 2011, the biggest 12-month advance since May 2010, the group said Wednesday. The median forecast of 30 economists in a Bloomberg survey projected a 4 percent gain.

In the Cleveland metropolitan area, the October 2012 measure was 101.50, which was down 0.6 percent from September and down 0.9 percent from September/August. The one-year change in the Cleveland metro index was an increase of 1.8 percent. That was the fourth-lowest figure of the 20 areas surveyed.

Property values nationwide will probably keep heading higher as record-low mortgage rates, a growing population and an improving economy spur demand for housing. The turnaround in real estate is buoying household confidence and wealth, one reason why consumer spending is growing even as concern mounts that lawmakers will fail to stave off looming tax increases.

“The housing recovery is moving along quite well,” Sam Coffin, an economist at UBS Securities LLC in Stamford, Conn., said before the release of the report. “Home prices are expected to keep rising as demand improves. Household formation has picked up, and that soaks up inventory pretty quickly.”

The price increase accelerated from a 3 percent advance in the 12 months ended September. The Case-Shiller index is based on a three-month average, which means the October data were influenced by transactions in August and September.

Home prices adjusted for seasonal variations rose 0.7 percent in October from the prior month, with 17 of 20 cities showing gains. Las Vegas showed the biggest gain with a 2.4 percent advance, followed by San Diego with a 1.7 percent increase.

Property values dropped the most in Chicago, which fell 0.7 percent over the month.

Unadjusted prices in the 20 cities dropped 0.1 percent in October from the prior month. Prices tend to decrease during this time of year, the group said.

The year-over-year gauge provides better indications of trends in prices, according to the S&P/Case-Shiller group. The panel includes Karl Case and Robert Shiller, the economists who created the index.

“It is clear that the housing recovery is gathering strength,” David Blitzer, chairman of the index committee, said in a statement. “Higher year-over-year price gains plus strong performances in the southwest and California, regions that suffered during the housing bust, confirm that housing is now contributing to the economy.”

Declining borrowing costs have underpinned demand for those able to get financing. The average rate on a 30-year, fixed mortgage was at 3.37 percent last week, close to the 3.31 percent from a month earlier that was the lowest in data going back to 1972, according to mortgage guarantor Freddie Mac.

Americans bought previously owned homes in November at the fastest pace in three years, figures from the National Association of Realtors showed in a Dec. 20 report.