Prices for single-family homes climbed in 88 percent of U.S. cities in the third quarter as buyers competed for limited inventories that included fewer discounted foreclosures.

The median transaction price rose from a year earlier in 144 of 163 metropolitan areas measured, the National Association of Realtors said in a report. A third of areas had double-digit increases.

Home prices are extending a recovery across the country, fueled by a tight supply of listings and a smaller share of distressed sales, which drag down values.

The U.S. housing market had five months of inventory in the third quarter, down from 5.9 months a year earlier, data from the Realtors group show. Completed foreclosures in September plunged 39 percent from a year earlier, according to CoreLogic Inc.

“Most regions of the country are experiencing strong home-price appreciation off a low base,” Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC in New York, said in a telephone interview. “Cities with the biggest price appreciation are in places that had bigger busts.”

Price gains in some cities are approaching unsustainable levels, Fitch Ratings said today in a report. Much of coastal California is more than 20 percent overvalued, the firm said.

The nationwide median price for an existing single-family home was $207,300 in the third quarter, up 12.5 percent from a year earlier, the Realtors group said.

Lower Affordability

Rising home prices and borrowing costs are causing some buyers to hold back. The average rate for 30-year fixed loans was 4.1 percent last week, up from a near-record low of 3.35 percent in early May, according to McLean, Virginia-based Freddie Mac.

Contracts to buy existing homes dropped the most in more than three years in September, the Realtors association reported last week.

“Rising prices and higher interest rates have taken a bite out of housing affordability,” Lawrence Yun, the group’s chief economist, said in the statement.

“However, we have the ongoing situation of more buyers than sellers in the market, so lower sales will help to take the pressure off home-price growth and allow them to rise slowly at a single-digit growth rate in 2014.”