The world’s largest alternative-asset manager is among investors buying distressed properties in the Chicago area after private-equity and hedge-fund firms helped send property values surging in hard-hit markets such as Phoenix and Atlanta. That demand, along with low mortgage rates and a growing economy, is now fueling a recovery in the third-biggest U.S. city as it joins the housing resurgence that already has bolstered much of the country.

Chicago home prices climbed 11 percent in November from a year earlier, the biggest jump in almost a quarter century, according to S&P/Case-Shiller data. While gains are slowing across the country, the Windy City was one of nine areas in the group’s 20-city index to show a year-over-year increase in housing values.

“They flocked in the early recovery to places such as Phoenix and Las Vegas and parts of California, and Chicago and some other markets lagged behind a little bit,” said Lance Ramella, a senior vice president at John Burns Real Estate Consulting in Naperville, Illinois. “Chicago just wasn’t providing that yet and now it is.”

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