Dive Brief:

• U.S. home prices are continuing to climb, according to the latest S&P Core Logic Case-Shiller U.S. National Home Price Index, which put them up 5.6% year-over-year in October compared to an increase of 5.4% in September.

• Prices nationally are 0.2% ahead of the market’s 2006 peak, while metros in the index's 20-city and 10-city composites are still -7.1% and -9.2% off that mark, respectively.

• The 20-city composite index saw prices rise 5.1% year-over-year while prices in the 10-city index increased 4.3% for the period. Seattle, Portland and Denver continue to see the most significant price increases.

Dive Insight:

Despite forecasts of a tapering, home prices in the U.S. are showing no sign of abating, supported by a shortage of housing inventory, healthy economic activity and tighter lending standards since the recession.

The shortage of homes on the market was recently underlined in a Zillow report that found for-sale inventory levels have fallen for 22 consecutive months, while latest Commerce Department figures show single-family housing starts down 4.1% in November from October to an adjusted annual rate of 863,000, albeit 5.3% ahead of the same period a year ago.

Although prices are set to continue to climb into 2017, industry observers caution recent increases in mortgage interest rates could temper the gains, exacerbating affordability concerns amid stagnant wage growth.

A decision by the Federal Reserve earlier this month to raise interest rates by 25 basis points—to a range of 0.50% to 0.75%—is also expected to subdue the mortgage market. The Fed may further increase rates in 2017.

David Blitzer, chairman and managing director of the Index Committee at S&P Dow Jones Indices, warned in the latest report that affordability measures, which are based on median incomes, home prices and mortgage rates, have fallen by 20% to 30% since home prices bottomed in 2012. Although consumer confidence is high and unemployment is low, home prices cannot keep increasing faster than incomes and inflation, he said.

The comments follow a December report by RealtyTrac finding the affordability of homes nationally to be at its lowest level in eight years as rising home prices outstrip wage growth.

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