U.S. home prices rose in December from a year earlier at the fastest pace in 11 months, as prospective buyers bid against each other for a limited supply of available property.
The Standard & Poor's CoreLogic Case-Shiller 20-city home price index, released Tuesday, increased 5.6 percent, the most since January 2016. Meanwhile, nationwide the gain in values was the biggest since 2014, National home-price gauge climbed 5.8 percent in the 12 months through December, the most since June 2014.
The price gain reflects the healthy pace of home sales, which increased in January to the fastest level in a decade. Steady job gains and growing consumer confidence have encouraged more people to take the plunge and look for a home.
Still, mortgage rates have risen since last fall, and with prices also increasing, homes are becoming less affordable. A measure of pending home sales declined in January, a sign that final sales may soon fall as well.
Several Western cities continued to see the fastest increases nationwide: Prices in Seattle jumped 10.8 percent in December from a year earlier, while they rose 10 percent in Portland and 8.9 percent in Denver.
The Case-Shiller index covers roughly half of U.S. homes. The index measures prices compared with those in January 2000 and creates a three-month moving average. The December figures are the latest available.
David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, said that adjusted for inflation, home prices nationwide rose 3.8 percent last year. That's higher than the average annual rate of 1.3 percent since 1975, but within normal historical ranges, he added.
"Home prices continue to advance, with the national average rising faster than at any time in the last two-and-a-half years," said Blitzer. “Home prices are rising, but the speed is not alarming,” Blitzer said in a statement. “One factor behind rising home prices is low inventory.”
Nevertheless, Blitzer said, the pace of increases is not surprising when examined in an inflation-adjusted, historical context. While the current annualized pace, adjusted for inflation, is 3.8 percent compared with an average since 1975 of 1.3 percent, it is within a normal range of between negative 4 percent and positive 7 percent.
Mortgage rates could upend the mostly healthy trends in housing in the coming months. The rise in home sales last month may have reflected a rush of buyers trying to get ahead of higher borrowing costs.
The interest rate on the 10-year Treasury note and mortgage rates have increased since the presidential election, as investors anticipate faster growth and inflation under President Trump. The average 30-year fixed mortgage rate was 4.16 percent last week, about a half-point higher than last year's average of 3.65 percent.
That's still historically low, however. The 30-year rate has averaged 6.4 percent since 1990, Blitzer said.
(Newsmax wires services the Associated Press, Bloomberg and Reuters contributed to this report).
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