US home prices rose in January by most in 2 ½ years

US home prices rose in January by most in 2 ½ years

A gauge of United States home prices rose to a 31-month high in January.

Month-over-month, the U.S. Index rose 0.2% in January before seasonal adjustment, while the 10-city rose 0.3% and the 20-city index increased 0.2% from December to January.

The index for Bay Area condo values slipped another 0.2 percent in January but remains 2.3 percent higher versus the same time last year, the smallest year-over-year gain since 2012, and 20.4 percent above its previous cycle peak in October 2005. Right now, tight inventory and rising prices pose the biggest challenges, making it hard for some buyers to find houses that are both appealing and affordable. And 12 cities reported greater price increases in the year ending January 2017 versus the year ending December 2016, the report said.

"Housing and home prices continue on a generally positive upward trend", said David M. Blitzer, managing director at S&P Dow Jones Indices.

Three or four additional rate increases, in conjunction with rising prices and low inventories of homes for sale, could hurt home affordability. The highest price increases were again recorded in the red-hot markets of Seattle, Portland, and Denver.

The limited supply of homes on the market has helped push prices higher. The Case Shiller Chicago index's one year gain was the highest in 31 months. Higher prices and rising mortgage rates could shrink the number of households that that can afford to buy at current price levels, forcing prices to level off and decline eventually, the firm said.

First American's Chief Economist Mark Fleming said prices can't rise indefinitely, but that lower-than-average mortgage rates have kept homes within an affordable range.

He doesn't expect the Federal Reserve's recent rate hike to dampen home sales and prices.

"However, we don't appear to be there yet". For instance, the 20 city composite index is still 6.6% below peak. This situation is not that unusual among the major metro areas, though Chicago is worse off than numerous others, despite the fact that the nation as a whole is experiencing record home prices. The slowest annual gain was again in NY at 3.2%.

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