WASHINGTON (AP) — U.S. home prices rose in September from a year earlier at the fastest pace in 13 months as a lack of houses for sale has forced buyers to bid up available properties.
The Standard & Poor's/Case-Shiller 20-city home price index, released Tuesday, increased 5.5 percent in September compared with a year ago, the largest annual gain since August 2014.
Steady job gains and low mortgage rates have propelled a solid rebound in home sales, which are on track to reach the highest level since 2007. The unemployment rate fell to 5 percent in October as employers added the most jobs since December. Borrowing costs have ticked up but remain below 4 percent, a low level historically.
San Francisco reported the largest annual home price increase, at 11.2 percent, followed by Denver at 10.9 percent. Portland had the third largest gain, at 10.1 percent. All 20 cities surveyed reported higher prices than a year earlier.
On a monthly basis, prices rose 0.2 percent in September from August. Prices rose in seventeen of 20 cities from the previous month. They fell in Chicago, Cleveland and Washington, D.C.
Sales of existing homes, while improving, have been volatile this year. They slipped in October after a healthy jump the previous month, according to the National Association of Realtors.
Overall, home sales have increased 3.9 percent in the past 12 months. At the same time, the number of available homes has fallen 4.5 percent.
That squeeze has pushed up prices. The typical home sold for $219,600 last month, up nearly 6 percent from a year ago, the Realtors group said Monday. That is the highest median price for the month of October since October 2005, at the height of the housing bubble.
Home prices are rising at more than double the pace of inflation and much faster than wages, pricing many Americans out of the housing market. That has also pushed up rents as Americans increasingly stay in apartments.
Still, home prices are rising at a much slower pace than the double-digit gains seen in most of 2013. David Blitzer, chairman of the S&P Dow Jones Index Committee, said that the higher prices aren't out of line with rising rents. That's a change from the housing bubble, when home prices soared much higher than rental costs.
Several factors are likely holding back the supply of available homes. Many Americans still don't have much housing equity and as a result would profit little from a sale. That may be delaying them from listing their homes.
In addition, the average rate for a 30-year mortgage has picked up in the past three years. It is currently almost 4 percent, which is still low. But millions of Americans have refinanced their mortgages at much lower rates and may be reluctant to trade up to a new home because doing so would require taking on a higher mortgage rate.
Developers are also building homes at a historically modest pace. Construction of single-family homes dropped 2.4 percent in October compared to the previous month, the Commerce Department said last week.
The Case-Shiller index covers roughly half of U.S. homes. The index measures prices compared with those in January 2000 and creates a three-month moving average. The September figures are the latest available.