(CN) – Home prices rose at their fastest pace in more than three years in 2017, as buyers competed in a sales market defined by a limited number of available properties, Standard & Poor’s said Tuesday.
The financial services company’s latest S&P CoreLogic Case-Shiller national home price index rose 6.3 percent in 2017 — the most since June 2014.
The gains were led by Seattle, Las Vegas, and San Francisco, which reported the highest year-over-year gains among the 20 cities.
In December, Seattle led the way with a 12.7 percent year-over-year price increase, followed by Las Vegas with an 11.1 percent increase, and San Francisco with a 9.2 percent increase.
Nine cities reported greater price increases in the year ending December 2017 versus the year ending November 2017.
Steady hiring and broad economic growth are making it easier for more Americans to afford a house, spurring demand. But fewer Americans are listing their homes for sale, in some cases because they would face a higher mortgage rate if they bought a new home.
The number of homes for sale in January was the lowest for that month on records dating back to 1999.
David Blitzer, managing director at S&P Dow Jones indices, “The rise in home prices should be causing the same nervous wonder aimed at the stock market after its recent bout of volatility.”
Blitzer said home prices in the S&P CoreLogic Case-Shiller 20 city index have soared 62 percent from their low point during the post-2008 recession. That’s much faster than the 12.4 percent increase in inflation.
“None of the cities covered in this release saw real, inflation-adjusted prices fall in 2017.,” the economist said. “The National Index, which reached its low point in 2012, is up 38 percent in six years after adjusting for inflation, a real annual gain of 5.3 percent.”
The National Index’s average annual real gain from 1976 to 2017 was 1.3 percent.
“Even considering the recovery from the financial crisis, we are experiencing a boom in home prices,” Blitzer said.
But he added that over the last few months, “there are beginning to be some signs that gains in housing may be leveling off.
“Sales of existing homes fell in December and January after seasonal adjustment and are now as low as any month in 2017,” he said. “Pending sales of existing homes are roughly flat over the last several months. New home sales appear to be following the same trend as existing home sales.
“While the price increases do not suggest any weakening of demand, mortgage rates rose from 4 percent to 4.4 percent since the start of the year. It is too early to tell if the housing recovery is slowing. If it is, some moderation in price gains could be seen later this year,” he said.
A persistent slowdown in sales could rein in the pace of price appreciation. Existing home sales dropped in January by the most in three years. New home sales also fell in January. Unseasonably cold weather may have pulled down sales across the board.