Home prices continue rise in August

S&P said price gains continue to be supported by low mortgage rates and an improving economy

Home prices continue rise in August
Home prices across the US rose on annual and monthly bases in August, according to the S&P CoreLogic Case-Shiller Indices released by S&P Dow Jones Indices.

There was a 6.1% annual gain in the S&P CoreLogic Case-Shiller US National Home Price NSA Index, which covers all nine US census divisions. The August gain compares to the 5.9% increase recorded in the previous month.

The 10-City Composite index recorded an annual increase of 5.3%, higher than the 5.2% increase in the prior month. The 20-City Composite posted a 5.9% gain from the year-ago period, up from the 5.8% gain a month ago.

On a month-over-month basis, the national index posted a 0.5% gain in August before seasonal adjustment. On the same bases, the 10-City and 20-City Composites recorded gains of 0.5% and 0.4%, respectively.

The seasonally adjusted national index increased 0.5% in August, while the 10-City and 20-City Composites posted 0.5% month-over-month gains. S&P said 19 of the 20 cities covered reported price increases both before and after seasonal adjustment.

"The ongoing rise in home prices poses questions of why prices are climbing and whether they will continue to outpace most of the economy,” said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices. “Currently, low mortgage rates combined with an improving economy are supporting home prices. Low interest rates raise the value of both real and financial long-lived assets. The price gains are not simply a rebound from the financial crisis; nationally and in nine of the 20 cities in the report, home prices have reached new all-time highs.”

Blitzer said, however, that there is a limit to price increases. Affordability measures are beginning to slide, signaling a shrinking buyer pool. He also said that mortgage rates would likely follow any increase in short-term interest rates by the Federal Reserve, which would removed a key factor in rising prices.

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