(CN) — Home prices are up 6.2 percent from a year ago, a sign that demand remains strong in a market defined by a shortage of properties for sale, Standard & Poors said Tuesday.
The latest S&P CoreLogic Case-Shiller national home price index stood in October a solid 6 percent above its previous 2006 peak.
Seattle, Las Vegas, and San Diego reported the highest year-over-year gains among the 20 cities included in the index. In October, Seattle led the way with a 12.7% percent year-over-year price increase, followed by Las Vegas with a 10.2 percent increase, and San Diego with an 8.1 percent increase.
Nine cities reported greater price increases in the year ending October 2017 versus the year ending September 2017.
Prices are rising at more than double the pace of wage growth, creating some affordability pressures that have been offset by relatively low mortgage rates.
Metro areas with booming job markets and the steepest home price gains could see more residents staying as renters.
“Home prices continue their climb supported by low inventories and increasing sales,” said David Blitzer, managing director & chairman of the Index Committee at S&P Dow Jones Indices. “Nationally, home prices are up 6.2 percent in the 12 months to October, three times the rate of inflation. Sales of existing homes dropped 6.1 percent from March through September; they have since rebounded 8.4 percent in November.
“Underlying the rising prices for both new and existing homes are low interest rates, low unemployment and continuing economic growth,” Blitzer continued. “Some of these favorable factors may shift in 2018. The Fed is widely expected to raise the Fed funds rate three more times to reach 2% by the end of the New Year. Since home prices are rising faster than wages, salaries, and inflation, some areas could see potential home buyers compelled to look at renting.”
Sales of existing homes in November reached their strongest pace since December 2006, according to the National Association of Realtors. But the sales growth hasn’t compelled more people to list their homes for sale, as the number of properties on the market has tumbled nearly 10 percent in the past 12 months.
Mortgage giant Freddie Mac said last week that the rate on 30-year fixed-rate mortgages averaged 3.94 percent, down from 4.30 percent a year ago.
The Associated Press contributed to this report.