Today, S&P Dow Jones Indices released its results for the Case-Shiller Home Prices Indices which showed an annual increase of 5.4% in January 2016 for national home prices.

Average home prices for the top 10 metropolitan areas is up by 5.1%, and up 5.7% in the top 20 metropolitan areas. Monthly, these three rose by a seasonally adjusted 0.5%, 0.8% and 0.7% respectively.

“Home prices continue to climb at more than twice the rate of inflation,” says David Blitzer, Index Committee at S&P Dow Jones Indices managing director and chairman. “The low inventory of homes for sale, currently about a five-month supply, means that would-be sellers seeking to trade up are having a hard time finding a new, larger home.”

“The recovery of the sale and construction of new homes has lagged the gains seen in existing home sales,” Blitzer said. “This may be starting to change: starts of single family homes in February were the highest since November 2007. The single-family home share of total housing starts was 70% in February, up from a low of 57% in June 2015, and approaching the 75%-80% range seen before the housing crisis.”

Whereas the western U.S. saw large home price increases, the northeast saw the lowest increases.

“While low inventories and short supply are boosting prices, financing continues to be a concern for some potential purchasers, particularly young adults and first time home buyers,” Blitzer said. “The issue is availability of credit for people with substantial student or credit card debt. While rising home prices are certainly a factor deterring home purchases, individual financial positions are more important than local housing market conditions.”

“One hopeful sign is that the home ownership rate, at 63.7% in the 2015 fourth quarter, may be turning around,” Blitzer said. “It is up slightly from 63.5% in the 2015 second quarter but far below the 2004 high of 69.1%.”

This chart shows the Case-Shiller Home Price Indices for national, 10-City Composite and 20-City Composite dating back to 1988.

Click to Enlarge


(Source: S&P Dow Jones Indices and CoreLogic)

Reports for the end of 2014, on the other hand, were much different as home price growth continued to slow as both the 10-city and 20-city composites witnessed year-over-year growth rates decline in November compared to October, S&P/Case-Shiller’s Home Price Indices reported.

“The rising home prices across the country further prove Americans’ desire for home ownership,” Quicken Loans vice president Bill Banfield said. “Although the number of houses available continues to lag behind those looking to buy, the enthusiasm in the market should give a good argument to owners thinking of selling.”

Zillow explained that the rising prices are making the housing market particularly harder for homebuyers.

”Home price appreciation came in stronger than expected, with West coast markets showing some of the largest gains, in today’s Case Shiller index for March,” Zillow chief economist Svenja Gudell said. “It remains a tough home buying season for buyers, with little inventory available among lower-priced homes.”

“The competition is locking out some first-time buyers, who instead are paying record-high rents,” Gudell said. “For home buyers looking for a home, the luxury market, including the condo market, are the places to find a better selection and even some price cuts as supply outpaces demand.”