The CoreLogic (CLGX) measure of house prices surged by a seasonally adjusted 1.4% month-over-month in January, the largest monthly gain in almost two years, however, Capital Economics thinks this surge will be short term.

CoreLogic’s January home price index report showed that home prices nationwide, including distressed sales, increased 5.7% in January 2015 compared to January 2014. This change represents 35 months of consecutive year-over-year increases in home prices nationally.

On a month-over-month basis, home prices nationwide, including distressed sales, increased by 1.1% in January 2015 compared to December 2014.

“This acceleration appears to have been caused by the tightness of supply conditions in recent months,” says Ed Stansfield, chief property economist for Capital Economics, in a client note. “Moreover, with real incomes rising rapidly and consumer confidence soaring, the conditions are certainly in place for a temporary period of faster house price inflation.

Looking ahead, Stansfield says, a sustained rise in homebuilding should see supply conditions loosen.

“And with housing now approaching fair value, we doubt that prices will rise by much more than incomes over the next couple of years,” he says.

CoreLogic’s reports shows that home price appreciation has generally been stronger in the western half of the nation and weakest in the mid-Atlantic and northeast states.

“In part, these trends reflect the strength of regional economies. Colorado and Texas have had stronger job creation and have seen 8% to 9% price gains over the past 12 months in our combined indexes,” said Frank Nothaft, chief economist at CoreLogic. “In contrast, values were flat or down in Connecticut, Delaware and Maryland in our overall index, including distressed sales.”

Stansfield notes that GDP growth slowed to 2.2% annualized in the fourth quarter of last year, and this followed a clearly unsustainable 5% surge in the third quarter.

“Therefore, the data do not signal a major slowdown. Looking ahead, we expect the benefits of lower oil prices and lower long-term borrowing costs to outweigh the hit to exporters from the stronger dollar,” Stansfield says. “This should contribute to stronger growth of around 3% over the first half of this year.” 

Supply conditions have tightened in recent months, and although the total stock of homes currently for sale was little changed in January, it was below the historical average. This is mostly a reflection of the sharp decline in new listings, according to Stansfield. 

“The conditions are certainly in place for a temporary period of faster price inflation. Strong growth in employment and real incomes and soaring consumer confidence should all help support demand in the months ahead,” he says. “However, we don’t expect such rapid price rises to be sustained in the longer term. Increased homebuilding and the acceleration in prices will bring more sellers into the market, helping to keep a lid on prices.”