Housing prices in 20 U.S. cities accelerated more than forecast in October, rising by the most since mid-2014 as lean inventories continued to prop up values amid steady demand, SP CoreLogic Case-Shiller data showed on Tuesday.
The 20-city property values index increased 6.4% year-to-year (the estimate was 6.3%), the biggest gain since July 2014. The national home-price gauge rose 6.2% year-to-year, the most since June 2014. The seasonally adjusted 20-city index advanced 0.7% month-to-month (the estimate was 0.6%).
A lingering shortage of previously owned homes is keeping housing prices elevated. That’s allowed homeowners to recover the equity lost during the housing collapse and recession a decade ago. Sales, meanwhile, are strengthening as the labor market remains robust and borrowing costs stay close to historically low levels.
For those looking to buy for the first time, conditions are less favorable. Growth in property values is outpacing wage gains and limiting affordability, representing a headwind for the market.
“Home prices continue their climb supported by low inventories and increasing sales,” David Blitzer, chairman of the SP index committee, said in a statement. But that climb may be interrupted by the Federal Reserve hiking interest rates next year, he said. “Since home prices are rising faster than wages, salaries and inflation, some areas could see potential home buyers compelled to look at renting.”
All 20 cities in the index showed year-over-year gains, led by a 12.7% increase in Seattle and a 10.2% advance in Las Vegas. After seasonal adjustment, Las Vegas had the biggest month-over-month rise at 1.4%, followed by San Francisco with a 1.2% increase. Home prices rose 0.1% in Miami from the prior month, marking the smallest advance of all cities.