Home prices continued to rise in January, reaching a record-high for the fifth month in a row, according to the new S&P CoreLogic Case-Shiller Indices, a measure of U.S. home prices.
The indices are generated by S&P Dow Jones and CoreLogic and cover all nine U.S. census divisions. The latest version of the indices showed a 5.9% annual gain in January, up from an annual gain of 5.7% in December.
That increase places the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index at a 31-month high in January, continuing to top the records set in each of the previous four months.
“Housing and home prices continue on a generally positive upward trend,” said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices.
Blitzer said that rising home prices shouldn’t impact home sales going forward, but suggested that coming interest rate increases, on the other hand, could negatively affect the housing market.
“The recent action by the Federal Reserve raising the target for the Fed funds rate by a quarter percentage point is expected to add less than a quarter percentage point to mortgage rates in the near future,” Blitzer said.
“Given the market’s current strength and the economy, the small increase in interest rates isn’t expected to dampen home buying,” Blitzer added. “If we see three or four additional increases this year, rising mortgage rates could become a concern.”
The report also showed that the 10-City Composite posted a 5.1% annual increase, up from 4.8% in December, while the 20-City Composite posted a 5.7% annual increase, up from 5.5% in December.
Seattle, Portland and Denver reported the highest year-over-year gains among the 20 cities for the 12th consecutive month, with year-over-year price increases of 11.3%, 9.7% and 9.2%, respectively, the report showed.
Before seasonal adjustment, the National Index posted a month-over-month gain of 0.2% in January; the 10-City Composite posted a 0.3% increase and the 20-City Composite posted a 0.2% increase.
After seasonal adjustment, the National Index recorded a 0.6% month-over-month increase, and the 10-City and 20-City Composites both recorded 0.9% month-over-month increases.
Before seasonal adjustment, 13 of 20 cities reported increases in January. After seasonal adjustment, 19 cities saw prices rise.
Blitzer noted home prices’ continuing pace of record-breaking growth, suggesting that prices can’t grow forever, but said that it’s clear the market hasn’t topped out yet.
“While prices vary month-to-month and across the country, the national price trend has been positive since the first quarter of 2012. In February, the inventory of homes in the market represented 3.7 months of sales, lower than the long-term average of six months,” Blitzer said.
“Tight supplies and rising prices may be deterring some people from trading up to a larger house, further aggravating supplies because fewer people are selling their homes,” Blitzer continued.
“The prices also hurt affordability as higher prices and mortgage rates shrink the number of households that can afford to buy at current price levels,” Blitzer concluded. “At some point, this process will force prices to level off and decline – however we don’t appear to be there yet.”