Home prices in 20 major U.S. cities posted another solid gain in October, while a nationwide index showed prices rising to their highest levels since the financial crisis.
According to the latest S&P CoreLogic Case-Shiller numbers, the 20-city index rose 5.1% compared to a year earlier. The gain was in line with expectations and up slightly from a revised 5% in September.
The nationwide index rose 5.6% in October, exceeding its 2006 peak for the first time.
“Home prices and the economy are both enjoying robust numbers,” David M. Blitzer, managing director of the Index Committee at S&P Dow Jones Indices, said in a news release.
He noted, however, that mortgage interest rates rose in November and “are expected to rise further as home prices continue to outpace gains in wages and personal income.”
“Affordability trends do not suggest an immediate reversal in home price trends,” Blitzer added. “Nevertheless, home prices cannot rise faster than incomes and inflation indefinitely.”
The Case-Shiller index tracks existing home prices and are based on single-family home resales. Among major cities, Seattle led the way in October with a 10.7% year-over-year price gain, followed by Portland with 10.3% and Denver at 8.3%. New York had the smallest annual gain, at 1.7%.
As Business Insider reports, home prices “have been rising as a healthy jobs market and historically low mortgage rates have increased demand,” while constrained supply has “helped to bid up the prices of existing homes, especially in desirable East Coast and West Coast cities.”
However, if strong demand continues to push prices higher but wages don’t keep up, homes could become less affordable.
“Affordability measures based on median incomes, home prices, and mortgage rates show declines of 20-30% since home prices bottomed in 2012,” Blitzer said.