U.S. home prices rose at the fastest pace in three years in September, picking up steam across several major cities, according to the S&P CoreLogic Case-Shiller Indices.
Case-Shiller’s national home price index rose 6.2 percent year over year in September, up from the 5.9 percent annual gain in August. This was the highest annual gain since June 2014.
Prices gains also accelerated in several major cities.
The 10-city composite index posted an annual gain of 5.7 percent, up from 5.2 percent in August. The 20-city composite rose 6.2 percent year over year, up from 5.8 percent in August.
Home prices in Seattle outpaced all other cities, with a 12.9 percent annual gain, followed by Las Vegas and San Diego, at 9 percent and 8.2 percent, respectively. Case-Shiller reported that 16 cities saw prices accelerate in September. Eight cities have surpassed their past peak for housing prices.
There is little in the economy to suggest that home prices will ease up in the near future, said David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. He cited low interest rates and unemployment, tight inventories and the growing economy as factors pushing up home prices.
“One dark cloud for housing is affordability — rising prices — means that some people will be squeezed out of the market,” Blitzer said.
The National Association of Realtors (NAR) once again raised alarm bells about the rising prices. Throughout this year, housing analysts have bemoaned the lack of houses for sale in the lower-price points. NAR says that for-sale inventories of existing homes have fallen year-over-year for 29 consecutive months, and the supply was at the lowest point since 1999.
“This fast appreciation over income growth is not sustainable over many years,” NAR Chief Economist Lawrence Yun said.
“Either demand will [be] choked off from weakening affordability, or more robust construction needs to take place to calm home prices,” Yun said.
Earlier this week, Black Knight also reported that annual home-price gains accelerated to 6.4 percent in September, up from 6.2 percent in August. The Federal Housing Finance Agency reported that prices for homes purchased with Fannie Mae and Freddie Mac loans rose 6.5 percent year over year in the third quarter.
Not all the tracking studies, however, indicate that home prices are close to becoming unaffordable. The title company First American Corp. reported that home prices, when adjusted for income growth and interest rates, declined between August and September.
First American’s index suggests that real home prices are roughly 39 percent below their peak in the last housing boom in July 2006 and nearly 18 percent lower than prices in January 2000.
“Consumer house-buying power improved in September due to a combination of slightly lower rates and rising wages compared with August,” First American Chief Economist Mark Fleming said. “However, over the past 12 months, affordability has declined by 8 percent as nominal prices have increased faster than buying power.”
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