U.S. home prices climbing again, raising fears of bubble

WASHINGTON — U.S. home prices reached a new high in May for the sixth straight month, which might raise fears of another housing bubble roughly a decade after a previous one burst.

The Standard & Poor’s CoreLogic national home price index, released Tuesday, increased 5.6 per cent in May, the latest data available. It is now 3.2 per cent higher than its July 2006 peak.

Some analysts downplay the notion of a new bubble, and the unrelenting price increases might already be cooling sales. Other aspects of the last decade’s housing boom and bust, such as rapid sales increases and surging home building, aren’t happening now.

“Price increases vary across the country, unlike the earlier period when rising prices were almost universal,” David Blitzer, chairman of the Index Committee at S&P, said.

A separate price index maintained by the National Association of Realtors is also rising steadily, though it remains about nine per cent below its 2006 peak. The S&P CoreLogic index tracks the same houses over time and is considered a better gauge of price changes, while the NAR’s measure is affected by the proportion of higher-priced or lower-priced homes on the market.

Much of the price gain is being driven by Seattle; Portland, Oregon; and San Francisco. All three cities have strong population growth and more rental properties than other U.S. cities, S&P says.

Across the U.S., the number of homes for sale has fallen annually for the past 25 months. There were 1.96 million homes for sale in June, down 7.1 per cent from a year earlier.

Rising prices and a limited supply are starting to thwart would-be buyers. Existing home sales slipped 1.8 per cent in June, the realtors’ group said, and are nearly flat from a year earlier.