S&P 20-city home price in­dex soars 5.7% in June

Na­tional av­er­age above bub­ble peak, but this time for lack of sup­ply.

Austin American-Statesman - - BUSINESS - By Josh Boak

U.S. home prices climbed higher in June with gains that are eclips­ing in­come growth

cre­at­ing af­ford­abil­ity pres­sures for would-be buy­ers.

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.

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 also are 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.

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 ex­ist­ing 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 Real­tors’ me­dian sales price has surged 6.2 per­cent to $258,300.

Sup­port­ing de­mand have been rel­a­tively low mort­gage rates. The av­er­age 30-year fixed rate mort­gage was 3.86 per­cent last week, ac­cord­ing to mort­gage buyer Fred­die Mac.

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