Dive Brief:

• U.S. home prices were propelled past their July 2006 peak to an annual rate of 5.5% in September, up from 5.1% in August, amid a tightening supply pipeline and growing demand, according to the S&P CoreLogic Case-Shiller U.S. National Home Price Index.

• The composite index of the 20-largest cities tracked by the overall HPI was unchanged from August and was 5.1% ahead of a year ago. The 10-largest cities were up 4.2% from August and 4.3% year-over-year. While home prices nationally are 0.1% ahead of their July 2006 peak, the 20-city index remains 7.1% off that figure and the 10-city index 9.1% behind.

• Seattle led the 20-city index with an 11% year-over-year home-price increase, followed by a 10.9% hike in Portland, OR, and an 8.7% rise in Denver. 

Dive Insight:

The news, while good for homeowners, poses a challenge for builders, who are contending with sluggish recovery in new single-family construction, tight credit available to would-be buyers and low homeownership rates.

The market was expecting to meet a slew of first-time buyers in 2017, but a post-election spike in interest rates should keep many of them on the sidelines, according to Realtor.com's recent housing market forecast for 2017.

Instead, the pent-up demand from that group will likely be released onto the market slowly. First-time buyers of existing homes turned out in strong numbers, the NAR reported last week, taking a 33% share of sales in October following strong performance in September, but they are still behind their 40% pre-recession share.

U.S. housing stock declined for the fifth-consecutive quarter in the third quarter of 2016, falling 6.7% year-over-year, according to real estate listing website Trulia. While that’s pushing prices up, the cities experiencing the greatest home value appreciation — including Miami, Tampa, FL, Phoenix and Las Vegas — are still below their peaks. Housing starts hit a post-recession high in October, with the single-family category climbing 10.7% from September.

Despite the lingering concerns around low inventory and high prices, Zillow reported this week that the housing market should flip in favor of buyers in the next three years as more homes come onto the market, reducing price pressure. Zillow expects home-price appreciation to slow to a rate of 3% by October 2017.

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