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US home prices have extended to their best levels since the financial crisis, according to the October reading of the S&P/Case-Shiller index.
The national home-price index rose by 5.6% on an annualized basis in October, up from 5.4% in the prior month.
The 20-city index, which covers major metropolitan areas like Seattle and Chicago, increased by 5.1%, up from 5% in September.
Seattle, Denver, and Portland, Oregon, continued to record the highest highest annualized price increases.
Though prices are back at levels seen in the most recent housing bubble, economists contend that speculation and euphoria are not driving the market this time.
Home prices have been rising as a healthy jobs market and historically low mortgage rates have increased demand for homeownership since the financial crisis. Also, constrained supply helped to bid up the prices of existing homes, especially in desirable East Coast and West Coast cities.
Heading into 2017, at least two things are top of mind for housing economists. First, the prospect of higher mortgage rates may prompt prospective buyers who are dragging their feet to quickly lock in the lowest rates they can. Also, if strong demand continues to push prices higher but wages don’t keep up, affordability could worsen.
“Affordability measures based on median incomes, home prices, and mortgage rates show declines of 20-30% since home prices bottomed in 2012,” David Blitzer of S&P Dow Jones Indices said.
“With the current high consumer confidence numbers and low unemployment rate, affordability trends do not suggest an immediate reversal in home price trends. Nevertheless, home prices cannot rise faster than incomes and inflation indefinitely.”