Home prices continued their rise in December, according to the S&P CoreLogic Case-Shiller Indices, a measure of U.S. home prices.

The indices, generated by S&P Dow Jones and CoreLogic and covering all nine U.S. census divisions, showed an annual increase of 5.8% in December. This is up from November’s increase of 5.6% and sets a 30-month high.

“Home prices continue to advance, with the national average rising faster than at any time in the last two-and-a-half years,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “With all 20 cities seeing prices rise over the last year, questions about whether this is a normal housing market or if prices could be heading for a fall are natural.”

The 10-City Composite increased by 4.9% annually, up from 4.4% the month before, and the 20-City Composite increased 5.6% annually, up from 5.2% the previous month. The cities with the largest annual gain included Seattle, Portland and Denver, which saw increases of 10.8%, 10% and 8.9% respectively. And 12 cities reported higher price increases for the year ending in December than for the year ending in November.

“One factor behind rising home prices is low inventory,” Blitzer said. “While sales of existing single family homes passed five million units at annual rates in January, the highest since 2007, the inventory of homes for sale remains quite low with a 3.6-month supply.”

“New home sales at 555,000 in 2016 are up from recent years but remain below the average pace of 700,000 per year since 1990,” he said. “Another factor supporting rising home prices is mortgage rates. A 30-year fixed rate mortgage today is 4.2% compared to the 6.4% average since 1990.”

Here is a visual representation of that quote right there...you can see how dramatic Case-Shiller can shift in a down market.

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case-shiller

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

Before seasonal adjustment, the National Index posted a monthly gain of 0.2%, which increased to 0.7% after seasonal adjustment. The 20-City Composite and the 10-City Composite both increased 0.9% after seasonal adjustment, up from 0.3% before the adjustment.

In fact, 18 of the top 20 cities saw price increases in December before seasonal adjustment, and after the adjustment all 20 cities saw prices rise.

But while home prices are increasing across the U.S., the speed of increase is not alarming.

“In comparing current home price movements to history, it is necessary to adjust for inflation,” Blitzer said. “Consumer prices are higher today than 20 or 30 years ago, while the inflation rate is lower.”

“Looking at real or inflation-adjusted home prices based on the S&P CoreLogic Case-Shiller National Index and the Consumer Price Index, the annual increase in home prices is currently 3.8%,” he said. “Since 1975, the average pace is 1.3%; about two-thirds of the time, the rate is between -4% and +7%. Home prices are rising, but the speed is not alarming.”