WASHINGTON -- U.S. home prices climbed higher in June with gains that are eclipsing income growth -- creating affordability pressures for homebuyers.
The Standard & Poor's CoreLogic Case-Shiller 20-city home price index rose 5.7 percent in June, according to a Tuesday report. The separate national average rose as well, putting it 4.3 points above its housing bubble-era peak in July 2006.
Home prices in all 20 major cities increased from a year earlier, and all but six posted month-over-month gains, the report showed.
The price increases are different from the bubble period, when subprime mortgages led to a housing bust. There is a shortage of properties for sale, causing the prices to steadily rise at more than double the pace of average hourly earnings. Buyers are also relying on historically low mortgage rates to ease the affordability pressures. Cheaper borrowing costs have kept buyer demand strong despite the price increases.
Prices are likely to keep rising, said David Blitzer, chairman of the index committee at S&P Dow Jones Indices.
"Given current economic conditions and the tight housing market, an immediate reversal in home price trends appears unlikely," Blitzer said. "Price increases are supported by a tight housing market" with both the number of homes for sale and days a house is on the market declining for the past four to five years.
The largest price gain over the past year occurred in the Seattle metro area with a 13.4 percent increase year-over-year. Portland, Ore. and Dallas recorded sizable price growth.
But other metro areas are seeing a more tempered increase in home values.
Prices rose less than 4 percent in the more expensive New York City and Washington, D.C., markets. They increased just 2.9 percent in Cleveland and 3.2 percent in Chicago.
The National Association of Realtors said last week that the number of previously owned homes listed for sale has plummeted 9 percent over the past 12 months to 1.92 million. Because buyers are competing for fewer homes, the median sales price has surged 6.2 percent to $258,300.
Relatively low mortgage rates have also supported demand.
The average 30-year fixed rate mortgage was 3.86 percent last week, according to mortgage buyer Freddie Mac, the Federal Home Loan Mortgage Corp. Average rates have declined in recent months, in line with Treasury bond yields, as uncertainty has surrounded President Donald Trump's tax and infrastructure policies and their ability to stimulate faster economic growth.
Information for this article was contributed by Josh Boak of The Associated Press; and by Chobhana Chandra and Jordan Yadoo of Bloomberg News.
Business on 08/30/2017