US home price index hits 31-month high in January

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US home prices remain on the march, reaching their highest point since June 2014 in the first month of the year.

The S&P CoreLogic Case-Shiller Indices, which measures the nation’s 9 census divisions, showed home prices across the US posting a 5.9 per cent year-over-year gain in January, up from a 5.7 per cent increase a month earlier and hitting its highest point in 31 months.

Northwestern and western cities kept up their momentum, with Seattle, Portland and Denver seeing the largest year-over-year gains among the 20 cities included in the index, as they have for the last 12 months.

Even the Federal Reserve’s move earlier this month to increase interest rates by a quarter percentage point isn’t expected to lead to a dramatic rise in mortgage rates that could dampen home buyers’ enthusiasm, particularly with a tight housing supply, according to David Blitzer, managing director and chairman of the index committee at the S&P Dow Jones Indices, which produces the report.

However, if the Fed follows through with multiple additional rate rises later this year, as it has previously said it is targetting, that may be a cause for concern, Mr Blitzer added:

“Tight supplies and rising prices may be deterring some people from trading up to a larger house, further aggravating supplies because fewer people are selling their homes. The prices also hurt affordability as higher prices and mortgage rates shrink the number of households that can afford to buy at current price levels. At some point, this process will force prices to level off and decline – however we don’t appear to be there yet.”

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