U.S. home prices rose at a steady pace in January, pushing prices up at a faster pace than wages and putting more homes financially out of reach for would-be buyers.
The Standard & Poor’s/Case-Shiller 20-city home price index rose 4.6 percent in January compared with 12 months earlier, S&P said Tuesday. That is up from growth of 4.4 percent in December.
Few Americans have listed their homes for sale, and the tight supply has kept prices higher. The increases have eclipsed earnings, making it more difficult for buyers to save for a down payment and afford a monthly mortgage. The modest wage gains have diminished the boost that robust hiring and low mortgage rates should provide the housing market during the spring buying season.
“Home prices are rising roughly twice as fast as wages, putting pressure on potential homebuyers and heightening the risk that any uptick in interest rates could be a major setback,” said David Blitzer, chairman of the index committee for S&P Dow Jones Indices
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 January figures are the latest available.
Historically low mortgage rates and solid hiring have laid the foundation for stronger sales this year.
Average 30-year fixed rates were 3.69 percent last week, according to the mortgage giant Freddie Mac. The average has plummeted from a 52-week high of 4.41 percent, making it cheaper for would-be homeowners to buy.
Separately, employers have added 3.3 million jobs over the past 12 months, including 295,000 jobs in February. The hiring spree pace has caused the unemployment rate to drop to 5.5 percent from 6.7 percent. As more people in the economy hold jobs, more paychecks exist to fund home purchases.