Published: Wed, December 28, 2016
Markets | By Terence Owen

US home prices continue rise -- along with mortgage rates

US home prices continue rise -- along with mortgage rates

The S&P/Case-Shiller home price index for October increased by 5.1% year over year for the 20-city composite index and by 4.3% for the 10-city composite index.

The S&P CoreLogic Case-Shiller Indices showed a 5.6 percent increase in home prices for the 12 months that ended in October, up slightly from the record yearlong growth mark notched the month before. October's result matched the estimate of 5.1 percent from a Reuters poll of economists. "Affordability measures based on median incomes, home prices, and mortgage rates show declines of 20-30% since home prices bottomed in 2012", he said, adding that home prices can not continue to rise unless income and inflation also rise.

"With the high consumer confidence numbers and low unemployment rate, affordability trends do not suggest an immediate reversal in home price trends", he said.

"Home prices can not rise faster than incomes and inflation indefinitely", he said.

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Prices in the 20 cities rose 0.6 percent in October from a revised 0.5 percent in September on a seasonally adjusted basis, the survey showed, outpacing expectations for a 0.5 percent increase.

Home prices in the United States have been on the rise since they bottomed out in February 2012, and experts say improved domestic economic indicators mean it's unlikely they will begin falling anytime soon. The 10-city and 20-city indices both posted a month-over-month gain of 0.6 percent.

The biggest gains in home prices came in the West, with Dallas, Denver, Portland and Seattle all posting increases of 8 percent or more. While not the most timely indicator on home prices, the index is considered among the most accurate.

The indices, which measure home sales in markets across the United States, showed that the greatest price increases have occurred in the West and Northwest. On an unadjusted measurement, First American stated that the national price level is 0.01 percent below the housing-boom peak in 2007. "In 2013, we saw the significant slowing effect the "taper-tantrum" had on unadjusted house prices". While mortgage rates above four percent reduce affordability, accelerating wage growth and the expected slowdown in unadjusted price appreciation are both beneficial for affordability.

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